Seen in yesterday’s Investors Intelligence sentiment data, the Bulls are back with a rise to 59.2 from 53.6 and bears shrunk below 20 at 19.4 from 20.6 last week. As I’ve mentioned before, a Bull read 60+ is extreme and we are obviously close. Well, we can now add the individual investor that has completely thrown in the towel on the Bear side. AAII said Bears fell 6.6 pts to 24.9, the lowest amount since January 23rd 2020. The Bulls spiked 17.9 pts to 55.8, the most since early January 2018 when we were coming off the corporate tax cut package passing. Before that you have to go back to November 2014 to see a Bull read that high. Keep in mind that since March, the Bears exceeded the Bulls up until just a few weeks ago so this is quite a sea change in the mood of the individual investor. Bottom line, the end of the election and the vaccine news (vaccine news not captured in II but was in AAII) has sentiment ebullient again, particularly on the part of the individual investor. Thus, purely from a contrarian standpoint, this is a negative for the short term.
AAII BULLS over BEARS
We’ll go thru the overseas data but the numbers for the next few months will all be pre-vaccine and I believe the tough winter ahead will be given a free pass in terms of the market reaction. September machinery orders in Japan fell 4.4% m/o/m, more than the estimate of down 1% and follows a slight gain of .2% in August. This number is very volatile month to month and thus is never market moving. The Japanese economy continues to recover, especially along with the Asian region but this data points that it is still uneven. Meanwhile, the Nikkei closed up another .7% to the highest level since June 1991 but is still 34% below the 1989 bubble peak. I remain bullish on Japanese stocks.
Pointing to the uneven recovery, industrial production in September in the EU fell by .4% m/o/m, below the forecast of a gain of .6%. That is also down 6.8% y/o/y. We did see gains in Germany, France and Spain to name the big countries in the region but Italy’s IP fell 5.6% m/o/m, Portugal by 3.8% and Ireland’s fell by 4.7%. As the number is somewhat dated and pre selective shutdowns, it’s not market moving. The euro is up slightly but back above $1.18 while bond yields are down after this recent uplift. Stocks are red across the board in the EU.