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Falling sentiment, commodities positioning, S&P 500 Growth vs Value

Summary:
Falling Sentiment The recent decline in the NASDAQ 100 has caused the NASDAQ 100 Daily Sentiment Index to fall below 60 for the first time in more than 3 months. Looking at all the historical data from 2000 to present, this was a very bullish sign for stocks especially on the 3 month time frame. Commodities positioning Large speculator commodities positioning has reached a whole new level in recent days. Historically, this wasn’t great news for commodities. However, keep in mind that trends in financial markets over the past year have consistently been pushed to more extreme levels than they used to be. Hence, take this commodities positioning data with a grain of salt. S&P 500 Growth vs Value The S&P 500 Growth Index has been largely underperforming the Value Index, putting

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Falling Sentiment

The recent decline in the NASDAQ 100 has caused the NASDAQ 100 Daily Sentiment Index to fall below 60 for the first time in more than 3 months.

Falling sentiment, commodities positioning, S&P 500 Growth vs Value

Looking at all the historical data from 2000 to present, this was a very bullish sign for stocks especially on the 3 month time frame.

Falling sentiment, commodities positioning, S&P 500 Growth vs Value

Commodities positioning

Large speculator commodities positioning has reached a whole new level in recent days. Historically, this wasn’t great news for commodities. However, keep in mind that trends in financial markets over the past year have consistently been pushed to more extreme levels than they used to be. Hence, take this commodities positioning data with a grain of salt.

Falling sentiment, commodities positioning, S&P 500 Growth vs Value

S&P 500 Growth vs Value

The S&P 500 Growth Index has been largely underperforming the Value Index, putting the difference in their monthly % change well amongst one of the highest levels in history.

Falling sentiment, commodities positioning, S&P 500 Growth vs Value

In the past, when the monthly % difference between growth and value exceeded 6%, this was a bearish sign for stocks on all time frames primarily because this occurred during the dot-com bust.

Falling sentiment, commodities positioning, S&P 500 Growth vs Value

Now to increase the sample size let’s see what happens when the difference was more than 4%. This too was mostly a bearish sign for stocks on most time frames.

Falling sentiment, commodities positioning, S&P 500 Growth vs Value

Conclusion: market outlook

Here’s how I think about markets based on different strategies & time frames.

  1. Long term investors should be highly defensive right now. Look for opportunities away from public equities where there is less long term risk.
  2. Short term trend-focused portfolios should continue to ride the bull trend because no one knows exactly when it will end.

My discretionary market outlook does not reflect how I trade the markets right now. I trade based on my trading algorithm that cuts through the noise of endless research, indicators and charts.

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