| Released On 9/4/2014 8:15:00 AM For Aug, 2014 | ||||||||||
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The 204k print on consensus of 223k and the July downwardly revised 212k (June was revised up from 281k to 297k) is a miss, the silver lining is this marks 5 consecutive months of 200+k private non-0farm jobs added, the ugly side of the print is it's the worst since March.
Some of you probably already know this, I meant to post the chart yesterday, but Investors' Intekkigen's Bull/Bear ratio is at an all time low for bears not seen since 1987, or an all time high for the bull / bear ratio near 4.5x, in other words, it's never been higher.
I consider three types of analysis in order of importance and effectiveness, Technical, Mass Psychology which would include a report like this and Fundamental.
When sentiment reaches extremes it's more often than not an inverse indicator. Beyond the psychological point of view of extremes in sentiment, the low bear reading not seen since 1987 has a mechanical function in the market which is very dangerous.
For years, especially a decade or two ago, short sellers were considered a pariah and short selling had many false stigmas attached to it such as "You can't make more than 100% because a stock can only go to zero", which is not actually true because of the way margin works for short positions or "Short selling is unlimited risk as a stock can go to infinity", which is also not true as your broker will pull the trade long before it threatens their margin and finally "Short selling or betting against companies is un-American", this is where the mechanics of the market come in and why this latest survey is so dangerous to the market.
Short selling is the same as buy low sell high, just in reverse, you are trying to sell high (short) first and then buy low later (cover) for a profit, but every share that is sold short is a future promise of demand. In a market that is rapidly falling as bear markets often do as fear is a much stronger emotion than greed, often it is the short sellers covering and taking profits that provides a bid in the market and helps to slow declines, but with low numbers of shorts in the market, that promise of future demand is not there and this is when market declines get very dangerous. Of course you can take the middle man's (market maker/specialists) bid/ask if you place your order at market, but in a fast moving market, especially a panic, expect those spreads to be very wide.
The Investors Intelligence report is actually telling us quite a bit about the state of the market and its fragility as well as the fact that the Buy the Dip crowd still don't understand why "Buiy the dip " worked and why that reasoning is no longer valid, however they have been psychologically programmed to believe that there's a new normal which comes with every market bubble or irrational market, it's only later that investors look back and see that nothing is ever different, it hasn't been over centuries of recorded bubbles. Read about the Dutch Tulip Craze one day and you'll see just how far back and how insane this human psychology of greed and irrational disbelief actually goes, it's the same psychology that has been attached to every asset bubble since then.
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