Ryan Detrick: Hatred Fuels the Rally

Master technician Ryan Detrick is slowly becoming a must-read for me.  Here’s his latest for Schaeffer’s Investment Research on how despised this market has become of late:

As we’ve been saying for years now, this market is headed higher for two reasons: First, price action continues to be constructive; and second, overall expectations are still too low. Remember, lowered expectations make it much easier to have good news and thus, buying pressure.

Here’s a list of a few of the bigger-picture things I’ve noted recently as reasons to look forward to higher prices.

  • CNBC’s low ratings show no one is interested in this bull market
  • 75% of high school students believe the market is rigged
  • Bill Gross thinks stocks are a Ponzi scheme and the “cult of equity is dead”
  • Short interest is high and rolling over
  • Wall Street strategists are at 15-year lows in stock allocations
  • The American Association of Individual Investors (AAII) sentiment poll just had 13 straight weeks of more bears than bulls
  • There are huge outflows from equity mutual funds in the face of higher stock prices

These examples have all occurred over the past several months. Let’s take a closer look at this. We have Wall Street avoiding stocks, we have Main Street avoiding stocks, and we even have the potential for a whole generation of stock investors who think the whole thing is rigged. Yet, the Dow Jones Industrial Average (.DJI) is about eight percentage points away from a new all-time high! Simply amazing when you think about it.

Sentiment is, in many ways, a form of technical analysis. There are those who say sentiment has lost relevance but I’m not so sure.

Now, by the way, it’s very possible that the all the hatred is going to be right, but I’m not so sure about that either.


Real-Time Market Insights (Schaeffer’s)

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