This is what will really move the markets after today’s Fed meeting…
Investors Shrug Off Stock Market Declines
March 21 (King World News) – Here is a portion of today’s note from Jason Goepfert at SentimenTrader: “Stocks have been shaky in March after falling hard in February, but consumers keep getting more confident. That seems like it should be an automatic sell signal from a contrarian point of view, but it has not been. Stocks have rallied almost every time after seeing a price decline with high and rising confidence…
NEW KEITH NEUMEYER INTERVIEW:
Keith Neumeyer just spoke with KWN about $8,000 & $10,000 price targets for gold and much more, to listen immediately CLICK HERE OR ON THE IMAGE BELOW.
Jason Goepfert continues: “…consumers do not seem to mind the drop in stocks. The general U.S. consumer has been blissfully confident of not only good economic performance, but also a rising stock market. Based on preliminary readings, confidence rose in March after also rising in February.
The fact that consumers became more confident in the face of falling stock prices is what really worries contrarians. While the stock market does not equal the economy, it does have an impact and there is a high positive correlation between stock performance and confidence in the economy. If consumers ignore a drop in stocks, perhaps they’re showing some signs of excess comfort.
There have been a couple of other times in recent years that the S&P 500 dropped more than -3% in a month while Consumer Confidence rose at least +3%, both in 2015. Neither one was a warning sign, as stocks quickly resumed their rise.
Stock Drop Not Stopping Bullish Consumers
These bouts of “irrational” confidence didn’t have any negative impact on forward returns. It actually turned out to be a pretty decent buy signal over the medium-term, with only one failure out of eleven signals. The S&P displayed an impressive average return of nearly 5% during the next couple of months, with a better than 3-to-1 reward-to-risk ratio.
Careful Bears: Don’t Rely On Bullish Sentiment
One of the most common mistakes when using sentiment is the knee-jerk assumption that rising optimism is a sell signal. It’s the exact opposite. Bulls should want to see rising optimism, because that’s what triggers people to buy and propel prices even higher. Extremely high optimism is a different story, and right now we are seeing that as well, which is more disturbing than the simple fact that confidence is rising.
When it starts to fall is when we should really worry, whether stocks are rising at the time or not.
King World News note: KWN has just released a new audio interview with Keith Neumeyer discussing $8,000 and $10,000 price targets for gold as well as what he expects to see in silver and the mining stocks and you can listen to it by CLICKING HERE.
The charts and part of the commentary above are from SentimenTrader. To try a free 14-day trial of the internationally acclaimed work that Jason Goepfert produces at SentimenTrader simply CLICK HERE.
***Also Just Released Paul Craig Roberts – You Won’t Believe What Is Happening In The U.S. CLICK HERE.
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