With the S&P 500 posting its first weekly decline in 2012, it is a perfect time to review our blog poll on where the index will trade first: 1,300 or 1,400?
As we can see from the chart above, almost two thirds of all who voted favour the S&P 500 to close at 1,300 first, while just a little more than one third think 1,400 will be taken out first. Let us compare that to investor sentiment survey polls, usually viewed as dumb money:
- Individual investors (blue), tracked by the American Association of Individual Investors, this week reached 52% bulls and 20% bears, for a spread of over 30%. The chart above shows that those figures put us in 1.5 standard deviations above mean and slight short term extreme.
- Advisors (red), tracked by the Investor Intelligence, showed a reading of 52% bulls as well, while bears registered a 29% reading. The spread between two camps is therefore not as extreme as we see with the more volatile AAII readings.
- Active managers, tracked by National Association of Active Investment Managers, showed on average a 73% net long exposure on the US equities. We are now reaching 1.5 standard deviations above mean into slight show term extreme readings and are more than doubling last quarters average reading of 31% net long exposure.
- Finally futures traders are once again returning to optimism majority, tracked by Daily Sentiment Index and shown in the chart above. We currently have 72% bulls on Nasdaq Composite, so while not extremely bullish, it could be used as a sign of concern or a potential correction in coming days or weeks.
It seems that majority of the readers / voters of this blog stand against the majority of retail investors, newsletter advisors, futures traders and active fund managers. Contrarians all around, I guess. As I always say, you're either a contrarian or a victim!
My view remains bullish on risk assets in coming months of 2012. Having said that, I still remain neutral on equities, while very bullish on commodities due to the secular nature of the trends. Sticking to the topic of S&P 500, and looking at the chart above, I would have to fall into the 1,300 first camp. In all due respect, a correction to 1,300 would be decently healthy for the current uptrend, as we have a bullish trend line supporting prices there.