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There's panic in the air, and blood in the streets.
Financial assets are getting crushed…
The S&P 500 is down more than 8% so far in 2022. Treasury bonds are down 3%. Bitcoin has lost 21%. And, Cathie Wood's ARK Innovation Fund (ARKK) – the most widely touted ETF of the past two years – has given up all of its gains from 2021 and half the gains from 2020…
Folks are bearish.
Last week, the American Association of Individual Investors (AAII) reported that the percentage of survey respondents looking for a rally in stocks over the next six months was just 21%.
Those looking for a decline topped at 46%. That's the lowest percentage of bulls, and the highest percentage of bears in 18 months.
That means we're probably not too far away from the start of a rally.
Investor sentiment is a contrary indicator. When everyone else is bullish, it's usually a good time to be cautious. And, often the best time to put money to work is when everyone else is bearish.
Nobody was "buying the dip." Most folks were buying puts and betting on even more downside in the days ahead.
Of course, anything can happen. Maybe those put buyers will be right, and the financial markets will continue to get crushed this week.
But, the stock market typically does not reward popular trade.
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