How Big Is The Wall Of Worry

MarketWatch – Mark Hulbert: Wall of worry remains quite strong
Average timer continues to bet market headed lower
The contrarian winds continue to blow in the direction of higher prices. To be sure, the veritable wall of worry isn’t quite as robust as it was 10 days ago, when I last devoted a column to a contrarian analysis of advisory sentiment. (Read my Jun. 5 column, “Correction close to being over.”) But it’s almost as strong as it was then, despite a rally that has added 550 points to the Dow Jones Industrial Average. The average short-term market timer continues to bet that the stock market will go lower — which is a bullish omen, from a contrarian point of view.

The Economist – Dithering in the dark 
Quantifying the effect of political uncertainty on the global economy
EUROPE teeters at the edge of an economic abyss, its fate in the hands of political leaders at odds over how to solve the continent’s twin debt and bank crises. America may be pushed over a “fiscal cliff” at the end of the year by political dysfunction. And even China, although unlikely to take a deep dive, is hostage to the will and ability of its government to stimulate growth. More than at any point in recent history, the global economy’s fate is tied to the capriciousness of policymakers. How much does such uncertainty cost? Anecdotal evidence suggests that it costs a lot. Customers of Cisco Systems, the world’s biggest maker of internet gear, are taking longer to make decisions, according to John Chambers, the company’s boss. Their orders tend to be smaller than before, and to require more in-house approvals. They say they are planning to buy more stuff later this year, reported Mr Chambers recently, but “then in the very next breath they say it depends on what happens on a global and macro scale.”


As the chart below shows, the percentage of bears (red line) is not rising. It is at the same level as it was when bullish sentiment peaked in February (green line). The bulls are moving into the correction camp (blue line). So while some bulls are looking for a slight pullback, defined as a 10% correction, few are looking for a fullblown bear market.

Why are there no bears? See above. Traders have faith that central banks can print us to a bull market, so no one wants to be too negative. How much longer will this work?

Click to enlarge:

Source: Bianco Research

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