Re: [CANSLIM] The A's & B's in Acc/Dis

From: "Patrick Wahl" <pjwahl@attbi.com>
Subject: Re: [CANSLIM] The A's & B's in Acc/Dis
Date: Tue, 18 Jun 2002 08:00:58 -0600

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On 18 Jun 2002 at 7:16, Fred Richards wrote:

> Just a word of caution to those of you who have itchy trade fingers.

More words of caution, this was at CBS Market Watch today, this is part of it 
anyway, by Mark Hulbert on the front page if anyone wants the whole thing -


ANNADALE, Va. (CBS.MW) -- I hate to be a party pooper, but Monday's impressive 
market action has all the hallmarks of a bear-market rally.

If it really was the beginning of something more sustainable, then newsletter editors 
would have been much more skeptical of it.

In fact, however, the average newsletter editor reacted to Monday's rally by quickly 
converting back to the bullish camp.

Consider the Hulbert Financial Digest's stock market sentiment index, which 
measures the average equity exposure among market-timing newsletters that 
communicate their thoughts daily with their subscribers.

Between Friday's close and Monday's close, this index jumped from -5.2 percent to 
+16.7 percent, for one of the biggest one-day increases ever for this sentiment 
measure.

Bull markets like to climb a wall of worry, and this is anything but.

To get an idea of how just how complacent advisors are these days, contrast 
newsletter editors' reaction to Monday's 213-point Dow rally with how they 
responded just two weeks ago -- on June 3 -- to that day's 215-point plunge. On that 
earlier occasion editors reduced their exposure by a barely noticeable 0.8 percent.

The inescapable conclusion: While advisers are quick to turn bullish on in the wake 
of any rally, they are reluctant to turn bearish when the market plunges. That means 
there's still too much optimism and complacency.

To place advisers' current complacency in an historical context, take a look at the 
chart below, which plots the HFD's stock sentiment index over the past five years. 
The record low reading of the HFD's sentiment index, -81.8 percent, came on 
October 18, 1999.

In retrospect that might seem an odd time for excessive pessimism, since from our 
perspective several years later we think of the late 1990s as a period in which the 
market did nothing but go up. In fact, however, the equity market suffered a serious 
correction during the fall of 1999. And anxiety about the Y2K bug -- remember that? 
- -- was beginning to build to a fever pitch.

It turned out to be an excellent time to buy stocks. To its high in mid-March of 2000, 
just five months later, the Nasdaq Composite nearly doubled.

The HFD's sentiment index also spent many weeks in negative territory in the fall of 
1998, following the Asian currency crisis and the collapse of Long Term Capital 
Management.

In fact, as you can see from the accompanying chart, throughout 1999 - and even in 
1998 -- the HFD's stock sentiment index produced a series of lower lows. This is 
very characteristic of the wall of worry that bull markets like to climb.




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