• Chartist Corner: SPX Triple Top? Why This Time Is Different.

    by  • March 7, 2013 6:30 am • Breaking News, Chartist Corner, Charts to Watch • 3 Comments

    So we are back at new highs on the Dow and the SPX is right where it was back in ’00 and ’07.  There are lots of ways to measure ‘this time vs. that time’ – here’s my favorite.

    Mutual fund inflows and outflows are a nice way to gauge what the public thinks.  Sure, this isn’t perfect with the rise in ETF trading – still, it can give some type of picture as to what investors are thinking.

    Turning to data from the ICI, domestic equity mutual funds are a great way to measure what most investors still think of stocks here.  Remember, markets peak at euphoria and I simply don’t see it here.  This can change quickly, but right now it looks safe to say the longer-term bullish trend is alive and well.

    Back in ’00, they couldn’t get enough of stocks and domestic mutual funds.  That was a bad time to be in stocks.  Then in ’07  they started to be net sellers, again not a great time to be in stocks.  Well, take a look at now.  Most of your average investors want nothing to do with stocks here.  In fact, they’ve been net sellers of domestic mutual funds for going on five years!

    Is this time different?  Or will we create the dreaded ‘triple top’ on the SPX?  If I had to show one chart that said this time is indeed different and we’ll finally breakout, I think this one sums it up.

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    3 Responses to Chartist Corner: SPX Triple Top? Why This Time Is Different.

    1. Chuck@Davis.Name
      March 8, 2013 9:49 am at 9:49 am

      Looking at the chart, I wonder to what extent the increasing inversion between flows and the SPX represent the rise of the Internet, the “disintermediation” of brokers (removing the middlemen – and their experience) and the increase in self-directed investing. Corresponding to what is happening with news “reporting”, the removal of editorial oversight and control results in Alice in Wonderland interpretations of fact and irrational overreactions.

    2. March 7, 2013 4:46 pm at 4:46 pm

      Nathan, I’ve never been able to find solid ETF data. Although the ICI isn’t perfect, I like it b/c shows what the ‘Moms and Pops’ we always talk about are doing. They still want nothing to do w/ this market.

      I’m torn on it all about the Fed. Earnings up 130% since the lows and Warren Buffett is paying 20% premiums for a ketchup company. Fed didn’t make him do that. M&A is picking up and I think that is another good sign.

      I am writing a comparison of now vs ’07 tomorrow. Check that out. Some more thoughts there.

    3. March 7, 2013 12:21 pm at 12:21 pm

      Interesting article. It would be interesting to see how much of an effect ETFs have had on that data. Also, I think most of us can agree this is a fed induced bull market, how exactly are those dollars reaching equities (because they clearly are), i.e. are those dollars reaching the market through a vehicle other than mutual funds? What are your thoughts?

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