The Bull Case

Recently, it has paid to buy weakness and sell strength. But a decent case can be made for a continuation higher:

  • The American Association of Individual Investor's survey is showing that individuals are extremely pessimistic with bears outnumbering bulls by 14%. It is even more staggering that this is occurring as the S&P 500 is a mere 2% from its highs.

  • The put/call ratios are throwing off buy signals. Despite the 20 point bounce in the S&P 500 we saw a continuation of put activity yesterday.

  • The market is still slightly oversold and has a long way to go before it becomes overbought.

  • Bullishness on the Investors Intelligence survey has fallen by 10% recently.

I want the market to go down because I don't like the valuations I am seeing. Earlier in the year I was able to buy defensive stocks cheaply but those stocks have moved to a fair valuation, leaving me with slim pickings. I will likely be moving to the sidelines shortly but I see little reason to short the market with the current bearish sentiment.

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