SAUT: THIS PRICE ACTION IS NOT CONSISTENT WITH A NEW BEAR MARKET
Jeff Saut is not convinced that a new bear market is on the horizon. Saut highlights recent market action and some historical technical analysis to back up his point:
“Last Friday, however, the negative nabobs again came out of the woodwork emboldened by the egregious employment report. Nevertheless, Friday’s selling was contained, leaving the DJIA down only 21-points for the session after being down 159-points at 11:00 a.m. That price action is consistent with my sense that selling will not gain much traction. Reinforcing that view: the NYSE Advance/Decline Line has traded to a new high, stocks making new 52-week highs are substantially above stocks making new 52-week lows, Lowry’s Buying Power Index remains in an uptrend while Lowry’s Selling Pressure Index tagged a new low reading last week, credit spreads have been narrowing, the Volatility Index is retreating, and the bullish list goes on. Such metrics are inconsistent with the onset of a new bear market. As the Lowry’s service writes, “In Lowry’s 77 year history there has never been an instance, at this early stage of a new bear market, where Buying Power was at a new rally high and Selling Pressure at a new reaction low.” Plainly, I agree.”
Source: Raymond James
and the bullish list goes on.. on and on an d on. this is an extremely one sided argument that can be torn apart.
He’s not telling the complete truth here. We are still in the era of bad news=good news because it forces the FED’s hand. Some day stocks will have to sink or swim on their own. I’m sure Saut, Doll, (insert your favorite buy-side cheerleader here), and company are not looking forward to that day.
I do not wish to speak disparagingly about any service, everyone has periods of being right and wrong. However, the fact is that Lowry’s Buying Power index reached an All Time high in late May of 2001 with Selling Pressure declining, that was many months after the twin bull market peaks of March and September, 2000. In addition, Lowry’s Buying Power Index posted its All Time low with Selling Pressure testing its all time high in June of 2009, after the market had rallied 40%. This is the main reason they remained bearish until August 04, 2009.
To say “In Lowry’s 77 year history there has never been an instance, at this early stage of a new bear market, where Buying Power was at a new rally high and Selling Pressure at a new reaction low.” Is, in my opinion, a stretch and seems to be hoping their subscribers have a very short memory.
I don’t know how Lowry’s make its calculations for Buying power BUT if they are using the reported Advance/Decline data that would Skew/Bias the results to the upside in an uptrend and to the downside in a downtrend–and make them late on any turns Up or Down.
Of course since MC no longer works for Lowry’s their service has become unreliable.
Matthew
Thanks for that bit of enlightenment and clarification on Lowry’s track record. I do remember them being very bearish during the huge bounce off the bottom in Mar-May ’09. Something clearly seems to be faulty in the buying/selling pressure model as it surely should have recognized the huge shift in March ’09. They are quite suspect IMO.
They do make a good Seasoned Salt, though. I use it all the time.
“In Lowry’s 77 year history there has never been an instance, at this early stage of a new bear market.
There can not be a new bear market since we are still in the same hold bear market.”
Since the 1987 market collapse each correction have been avoided by artificial rates and each time the wall street leverage ratio has continue to increase pushing valuation to ridiculous levels. Now we are at 0% Wall Street is totally addicted and it needs even more.
Toxic assets are and have been swapped for cash and Investments Banks are paying debts buy issuing shares and more debts.
The correction has been postpone one more time in favor of more addictive low 0% rate and guaranties.
Sound economies do not work this way. In the real world Money has value and borrowers do pay interest for benefiting from it.
This is not a normal market, its a subsidized market and the guarantor is printing or borrowing just to pay interest in it’s debt.
Ponzi Schemes can’t be made viable and they eventually all collapse.
I might add that historical performance means nothing when you have an interested actor like the Fed in the market. Can we all stop pretending that it is otherwise?