Not enough bears yet for real bottom

If there is one thing last week’s 7.2% decline in the S&P’s didn’t do was shake the confidence of newsletter writers (did not include action this week). Investors Intelligence reported that bulls went up 1 pt to 47.3 while bears fell 1 pt to 23.7. This reflects a clear buy on the dip mentality. From a contrarian standpoint, we can only hope that Monday’s thrashing turned those numbers upside down as bear markets don’t bottom with more bulls than bears. While some may some we’re not in a bear market yet, the two main characteristics of one are oversold markets that get even more extremely oversold and secondly are followed by violent rallies that don’t last long. Another drop in the avg 30 yr mortgage rate to 4.37%, the lowest since Nov, from 4.45% in the week prior sent refi apps up 30.4% to the most since Nov. Unfortunately it did nothing to entice buyers of homes as purchase apps fell .9%. While overseas markets are mostly higher, the bounce is rather lackluster in the context of the previous selloff and the rally US markets had yesterday. While still trading better, Spanish and Italian debt have slowed their gains as the ECB bought debt for a 3rd straight day. China’s July exports impressively rose to a record high but their best customers are under major pressure so we obviously question the sustainability.

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