The End of the Cartoon Bull

Just six months ago, Hurricane Sandy drenched greater New York and everyone feared the worst for the stock market. The major indexes were unable to hold onto their respective summer rallies. Money managers couldn’t agree on where the market was headed.

On the other hand, I was bullish. Here’s what I wrote:

“Last week’s Barron’s cover perfectly captured the mood– with an angry cartoon bear dangling a bull by its tail over a brick ledge:

“The cover story accompanied the mag’s Big Money poll, which quizzes Wall Street money managers on the markets, politics and their favorite stocks. And as you’ve probably already guessed, many of those interviewed believe the bull market is getting a bit long in the tooth.”

Of course, you know what happened next. The market bottomed out a couple of weeks later, only to rip higher for the next six months.

Fast forward to this week, and you’ll see a very different market view on display. This time, the Barron’s bull is pogo-sticking over his bear nemesis, accompanied by a headline that proclaims “Dow 16,000!”

Crap.

Here’s Schaeffer’s senior technical strategist Ryan Detrick with the details:

“74% of those polled were bullish over the next 6-12 months, the highest in 20 years of the poll,” Detrick writes. “If everyone is bullish, then who is truly left to buy?  Back in October (the poll comes out every six months) just 46% of those polled were bullish.”

In interest of fairness, Barron’s isn’t always on the wrong side of the market. They publish these bull vs. bear cartoons on a regular basis to accompany their Big Money poll. Over the past couple of years, some of them have been on point.

But what’s really unnerving is the lopsided result of the money manager poll. I can forgive the silly cartoon. I can even ignore the gaudy “Dow 16,000!” headline. But when virtually every money manager is leaning toward one side of the canoe, I’m reaching for my life vest…

It goes without saying that you can’t time buying and selling with a magazine cover. But judging by the people who manage enough money to move the markets (keep in mind, they’ve been dead wrong for months) it’s time to get cautious.

The big stocks are strong. I’m not running from large-cap consumer staples and healthcare names just yet. But you can’t ignore the fact that breadth and sentiment indicators are flashing warning signs.

Stay defensive. Cash in your chips on your speculative names.

Greg Guenthner
for The Daily Reckoning

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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