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Still Bullish After All These Years

02/16/2014 4:00 pm EST


Kim Githler

Chair and CEO, MoneyShow

Untitled Document

Even as this current bull market gets longer in the tooth and notwithstanding the recent correction, the trend still remains bullish, and so are majority of traders, according to the results of MoneyShow’s latest trader sentiment survey, notes chair and CEO Kim Githler.

There has been more volatility already in 2014 than there was in most of 2013 so many are expecting a different type of market in 2014. The sharp decline in the emerging market currencies and stock markets panicked some investors by early February so I was curious to assess the outlook of traders for the first half of the year.

Traders like volatility, and therefore, the low volatility of the stock market in 2013 made it hard for some. This, along with the stock market’s strong trend, caused many hedge funds to perform worse than the standard market benchmarks.

Given the rocky start in 2014, the results of our survey of 582 traders had many surprises. It was conducted between February 3 and 10 and revealed that a majority of traders—58% to be exact—are expecting greater profits in 2014.

They were also quite upbeat about the stock market as 10% were very bullish (a 10% gain in the S&P 500) between now and June 30, and 37% were somewhat bullish (less than a 10% gain). A combined 37% were expecting the market to decline, with 11% looking for a drop of more than 10%. Only 16% were expecting the market to be unchanged.

It is therefore not surprising that only 11% of the traders surveyed expected that short sales would make up more than 50% of their trades during the time period. Over half are expecting to make most of their profits in stocks, with 35% looking to options for their gains.

As for other markets, 49% expect the dollar to be higher in the first half of the year, and the majority were also positive on gold. Between now and the end of the 2nd quarter, 17% think gold will be up over 10% with 41% looking for a gain of less than 10%. Only 4% were looking for more than a 10% drop in the price of gold.

There was no strong consensus on the outlook for either crude oil or the Japanese yen as 38% and 33%, respectively, think they will be unchanged in the first half of 2014. The traders did have a stronger opinion on interest rates as 51% are looking for rates to move above 3.0% by the end of June, and 3% are expecting the yield on the 10-year T-note to rise above 3.2%.

By most measures, the majority of the public is still underinvested in the stock market, unlike the top in 2000. Therefore, I do not think that the positive view of the stock market by traders, as well as investors (World Moneyshow Sentiment Survey), should be taken as a contrary indicator.

The overall positive view by traders is consistent with the many recent advances, which has leveled the playing field between the individual and the professional trader.

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