Three Die Hard Bulls Throw In The Towel

January 18, 2008 at 12:26 pm  ·  Category: Market Commentary, Sentiment Analysis

“Let’s keep paying attention to bulls who finally throw in the towel.  We are only at the very, very beginning of this process and it will take a year or two more to shake out the ones who are capable of changing their views out.”

“There Are Still Plenty Of Bulls”, Tuesday January 8, Top Gun FP

Just this week, three die hard, won’t back down, buy the dip bulls threw in the towel and turned bearish: Bernie Schaeffer, Art Laffer and Dan Sullivan.

(1) Bernie Schaeffer: I’ve followed Bernie Schaeffer’s sentiment analysis for quite a while now and always find it useful.  What I’ve never agreed with is his total adherence to sentiment and technicals without any concern for fundamentals.

Last Thursday, Schaeffer put up a short article saying that the S&P had closed the previous week below its crucial 80-week moving average and was poised to close below it for a second week. 

It did indeed close below it for a second week and yesterday Schaeffer’s Chief Technical Analyst Ryan Detrick was unequivocally bearish on CNBC, noting that the S&P was poised to close below the 80 week moving average for the third straight week.

That really gets my attention.

(2) Art Laffer: Barry Ritholtz this morning reported that Art Laffer actually said that we are in a recession right now on Kudlow & Co. last night.

Laffer is essentially a permabull who has had a complete blind spot to any arguments on the bearish side every time I’ve seen him on Kudlow.

So, again, this really gets my attention.

(3) Dan Sullivan: In an article on MarketWatch yesterday (and today’s most read article on the site), Mark Hulbert wrote an article, “A long time bull throws in the towel”.

Long time newsletter writer Dan Sullivan turned bearish on Wednesday and yesterday gave two main reasons to Hulbert in an interview.  First, all the major market averages recently convincingly broke below their August lows.  Two, the leading industry groups have broken down.

*****

One thing I found interesting about two of these conversions (Schaeffer and Sullivan) is that they are essentially completely based on technicals – the convincing break of the S&P below its August lows.

That’s why I wrote this on December 14th:

And if/when it finally does breakthrough 1400 to the downside, I think you’ll see a major sentiment shift as more and more people start to call it a bear market.  That should result in some serious selling (“The Technicals Are Bearish – Watch For The Break Below 1400”, December 14, 2007, Top Gun FP).

This is also why I dated the beginning of the bear market after the close this Tuesday when Intel disappointed after the major indexes all closed below their August lows: “The Bear Market Just Began – Intel Disappoints”.  Intel assured that the break would be “convincing”.

This is a bear market.  Trade accordingly.

UPDATE (Fri 1/18, 2:30pm PST): The WSJs MarketBeat cited this post this afternoon here.

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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