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This is the next installment of my annual review. If you’ve just found this, I’m looking back to the year that was and taking from each month in turn my most interesting commentary and analysis. Here are the previous month’s highlights: January, February, March, April, May, June and July.
That brings us to August 2009. As you’ll recall, by this time, the question of whether the rally was just a run-of-the-mill bear market rally changed to whether this was a secular or cyclical bull market. Sentiment reflected a renewed appetite for risk, which was shocking in contrast to just 6 months earlier when everyone was panicking that the (financial) world as we knew it had ended.
- Stock Market History Of High Momentum Thrusts
In this contribution from Wayne Whaley (CTA), he suggested that we had just had a rare breadth extreme which marked the start of a prolonged uptrend in the market.
- Bullish Percent Index: Overbought Or Bull Market?
I use the bullish percent index as a timing indicator - when it approaches a maximum, usually momentum wanes and vice versa. Although we were seeing almost every single bullish percent index hit the red zone, I made the argument that this was actually a bullish case.
- Lowry Research’s Intermediate Trend Buy Signal
After heaping scorn on the market rally for months and months, Lowry suddenly changed its mind and jumped on the bullish bandwagon. Their mea culpa was that the powerful thrust out of the March lows affected volume in such a way that it played havoc with their proprietary indicators (selling pressure and buying power).
- We Are All Traders Now
According to James Montier, the average holding period for a stock on the NYSE has shrunk to what it was back in the heyday of the roaring bull market of the 1920’s. Jesse Livermore famously said that “sitting” made him his money. But it seems the hyper-frenzied trading culture is now devoted to jumping from one half a cent profit to the next.
- Sentiment Overview: Week Of August 14th, 2009
The AAII weekly sentiment survey shifted to 51% bullish. The last time it was this optimistic was May 2008 and October 2007. Neither of those were actually good times to be optimistic. But this time, the S&P 500 managed to defy contrarian sentiment analysis and rose 12% from mid-August.
- Mutual Fund Cash Levels & NYSE Free Credits
Right at the lowest point in March, money market cash levels spiked to almost $4 billion as investors (both retail and institutional) bought into the safety of short term government paper. The ensuing drop in cash levels and the similar decrease in NYSE free credits was actually rather bullish.
- US Dollar Sentiment: Contrarian Bullish
While retail stock market investors were rediscovering their hooves and horns, they had nothing but disdain for the US dollar. According to the DSI, dollar sentiment was at a historic low; paving the way for a major reversal.
- The Aftermath Of Secular Bear Markets
This study of major bear markets and their eventual death provided insight into what we might expect for the rest of 2009. Accordingly, we were in the first stage and would look forward to even further gains. That would be followed by a correction and then sideways congestion.
- Will September Kill The Rally?
September, deservedly, has a very bad reputation for stock market returns. But this September turned out to buck the historical pattern. The S&P 500 gained 3.53% for the month - so, no, September did not kill the rally.
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