Sentimental Journey

Every week the American Association of Individual Investors polls their users asking the question: “I feel the direction of the stock market over the next 6 months will be?”

This group of retail investors is historically cautious relative to the “pros”.

Not surprising. The pros are on OPM…Other People’s Money.

Caution is AWOL amongst retail investors with the number of bearish respondents dropping to 19.6%. This is the lowest percentage since January 2018.

I’m sure you remember January 2018: It was a one-month parabolic run where the SPX exploded from 2682 to 2872.

It was the tail end to a Runaway Move that commenced on Nov 16^th, 2017.

That advance found its roots from an August 2017 trough.

From the January 26^th, 2018 spike high the SPX crashed into February 9^th.

Importantly the AAII bullish 19.6% low in bearish sentiment would take 3 crashes to flush out sentiment:

February 2018

December 2018

February/March 2020.

Interestingly at the October 2022 low AAII bearish percentage was 60.9.

At the recent October 2023 low the bears were at 50.3%

60 months ago in the winter of 2018, the SPX rallied from October 29^th, to December 3^rd.

It was a 2 step-rally, unlike the line-drive move last month.

Be that as it may, the market collapsed in December 2018.

Is it possible volatility ramps again this December on this 60 month fractal of the Gann 60 Year Cycle… just when it looks like a Santa Claus Rally is a fait accompli?

Just like it was assumed volatility was in hibernation at the end of January 2018?

Contrary to popular opinion, December can be notoriously volatile.

Last year the DJIA struck a high on Dec 1 and decline 2000 points to a low on December 22.

In 2021, the DJIA made a low on Dec 1, rallied to Dec 16, then dropped 1500 points in 3 days.