Europe Remains The Key

I was looking for some sort of a correction next week, but that correction came early and the outlook for next week is now more muddled. Looking at the intermediate term (4  weeks) the signs remain positive. However, if the situation in Europe deteriorates all bets are off.  I hate to hedge myself, but contagion trumps all if it occurs.

The market is oversold in the intermediate term and will remain that way for a few more weeks. According to the ISI survey hedge funds are at their lowest net long position since 2009. According to the AAII survey individuals are at their lowest stock allocation in nearly a year. From  Pragmatic Capitalism:




According to the NAAIM survey active managers are at their lowest net longs in a year and rivaling levels seen in 2009. From the NAAIM:



The put/call ratios are oversold in the intermediate term, Rydex traders are bearish as are newsletter writers as measured the Hulbert HSNSI.The weight of the evidence points to the crowd being positioned bearishly, leaving fewer potential sellers.

I expect a slow to recessionary economy and am not an economic bull by any means. That said, investors are already positioned for a very negative outcome and there are intermediate term rallies even in bear markets.

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