Friday screencast: panic rarely pays

abnormalreturns
August 27th, 2010

The market should be down today. Poor GDP numbers, talk of deflation from Ben Bernanke and a big earnings miss from Intel should all spell doom for the market. However at this moment the major equity indices are all up 1%+. Why? The answer is pretty simple. Sentiment.

In today’s screencast we note how gloomy the crowd has become of late. Talk of a double-dip recession, focus on an obscure technical indicator, the Hindenberg Omen, a huge run in bonds and a mass departure from the bullish sentiment camp all signal that things have gotten a bit too bearish of late. That is how the market can rally on a day like today.

As Dr. Phil notes in his most recent broadcast the market is working through a long, multi-year period of depression. We don’t know how long it will take to work out of it, but for now it looks like all the marginal bulls have been wrung out of the market. In short, panic rarely pays.

Posts mentioned in the above screencast:

Daily chart of Intel (INTC) . (Finviz)

We are finally seeing some panic in the sentiment numbers. (Bespoke, Money Game, Marketwatch, The Reformed Broker)

Market Shrinkology with Dr. Phil Pearman. (StockTwits TV)

Running away from growth. (Systematic Relative Strength)

Taking apart the Hindenberg Omen. (A Dash of Insight)

Roger Lowenstein on growing pessimism and the state of the stock market. (NYTimes)

Panic rarely pays. (tradefast)

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