Michael Santoli’s latest piece in Barrons highlights some notable signs of complacency as the market melts ever higher on the mystical hopes generated by the Bernanke Put and QE3. Santoli says:
“So it is that corporate insiders, one group that’s often quick to harvest windfalls, have been active on the offer side of the market in their employers’ shares, with sellers outnumbering buyers by more than six to one, says ISI Group strategist Bijal Shah. That weekly level has been reached just four times since early 2010. While this hasn’t always proved an urgent danger signal, it has tended to precede a softer period for economic momentum and the equity tape.
Back in early June, when the Standard & Poor’s 500 index had given up nearly all of its early-2012 gains in an anxious correction as Europe wobbled anew, the number of bullish market newsletter writers exceeded the bears in the weekly Investors Intelligence survey by only seven percentage points. Had any of them been asked then if they’d take a year-to-date gain in the index of better than 16% by Oct. 1, nearly all would have answered yes.
Yet now, with the market up exactly that much, the percentage of bulls looking for even more exceeds that of the skeptics by nearly the 30-point span that signifies the onset of a potentially unhelpful complacency. Combined with an excess of bullish call options versus puts, and the fact that once again last week the broad market was supported by defensive rather than growth-sensitive stocks and sectors, the picture of a market unlikely to run away to the upside becomes clearer.”