Investor sentiment most bearish in years . . . of course that is bullish.

The AAII investor sentiment polling as of last week fell the steepest in over a decade! It dropped 45% in one week to only 19.3% bullish.  The historical average bullish sentiment reading is 39% – 2X last week’s reading.  The bearish sentiment last week was 54.5%.  The historical average for bearish sentiment is 30.5%.  The ratio of bullish to bearish sentiment is clocking in at a remarkably low 0.75.  This level hasn’t been seen since the bear market lows of late 2008-early 2009.  Of course this set of facts has been historically bullish.  Lou Basenase at Wall Street Daily (here) did a good job reporting this tendency as is illustrated in the following table.AAII Bullish Reading table 4-15-13

Lou stated . . . “Since 1987, bullish sentiment has dipped below 20% on 26 separate occasions. So you can’t dismiss the findings as anomalies.  And just like today, when bullish sentiment readings are extremely low, the implications for stocks couldn’t be more, well… bullish!  For 24 out of 26 occurrences, stocks jumped higher three months following a low sentiment reading. That works out to 92.3% of the time.  The average gain? 6.5%.  And for 25 out of 26 occasions, or 96.2% of the time, stocks shot higher six months following a low sentiment reading. The average gain?  An impressive 13.4%.”

The strong rebound in the market today (April 16) is historically consistent.  While dips can be expected, history appears to be in favor of more stock market strength over the next few months.  Jeb B. Terry, Sr April 16, 2013

Is market due for a “dip”? S&P 500 now up nearly 100 trading days without a correction.

Market historians are correct to point out that the stock market tends to have a price correction of at least 5% every 118 days (according to David Bianco at Deutsche Bank).  Since we are now over 100 days since the last 5% correction it would seem that we are due for a pull back in the market this month or next. That said, Lou Basenase of Wall Street Daily made a good point that one needs to consider the standard deviation for the number of trading days between dips.  It turns out that the syandard deviation for the number of days between 5% dips is 92 days.  So, yes, the average is 118 days but the market since 1960 has gone as long as 350 days between dips and went over 150 days as recently as 2011.  I include Lou’s chart of the distribution of number of days between dips below. He also looked at the time span between 10% corrections and found a similar outcome i.e. that while we are approximately 380 days since the last 10%+ correction there is historical justification for the present rally to continue.  Lou concludes “it would hardly be a statistical anomaly if we went another 100 trading days without a pullback and another 380 days without a correction“.  I am reminded of the Mae West quote – “too much of a good thing can be wonderful” -eh?  Jeb B. Terry Sr. April 12, 2013

 

Tablets and smartphones continue to grow like crazy. More hardware = more software.

Gartner recently updated their estimates for worldwide computing / connected devices and to no ones’ surprise tablet shipments are expected to grow by 70% to 197 million units this year.  That is mind boggling in light of their only being launched in 2010,  Tablets are expected to exceed PC unit sales by 2017.  Smartphone shipments are expected to approach 1 billion units this year and exceed “dumb” phones for the first time.  The upshot of all this is there will be increasing demand for wireless bandwidth – expecially WiFi – and the surge in all manner of wireless apps – games and commerce – will likely continue.  This is all good for companies that enable what is scarce – i.e. bandwidth for wireless data – for for what is productive and cool – i.e. wireless software and services.  Aberdeen is highly focused on those kinds of companies.  Jeb B. Terry Sr. April 11, 2013

Gartner computing devices table 3-28-13

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