The Market: Sentiment Reset Appears to be Underway
Discussion
In the July 1 post below I said that a stiff correction into the September/October danger zone was likely to commence sometime in July from circa SPX 4600/4700. I’ll take it week by week, but as of now it appears evidence is aligned against a move to 4600/4700, at least without the sentiment gut check discussed last Thursday.
(1) First and foremost, as discussed this morning the two key conditions I am looking for to declare the bear market over - 90% of stocks above their 50dma and the yield curve un-inverted - refuse to comply with the bull case.
(2) “Dumb money” confidence in higher equity prices has mooned.
(3) Broader sentiment has peaked and is now beginning to roll over.
(4) US and European CDXs appear to be bottoming.
(5) And Flows & Liquidity and Economics “Teams” member, The Kitty, is starting to at least tap the table on the short side on the thesis that the left tail to growth, disinflation, and liquidity is quite fat.
Exhibits
“Dumb money” confidence has mooned.
Sentiment is beginning to roll.
CDXs appear to be bottoming out, with Europe making a gappy move higher this morning.
And The Kitty is getting negative. Don’t fight The Kitty.