Far From the Tree

Earlier this week I quipped, “When talk of  'Did you see what happened to APPL?' replaces 'Did you see what happened to the market today?'... will be a good indicator of public sentiment."

If there is one bell weather stock that is on the minds of the masses with acolytes the likes one expects from a cult with great lawyers, it is Apple. Their rabid following insists the stock is on a space shuttle trajectory and any cross talk otherwise is blasphemy. This is definitely one stock that is tightly coupled to the company in the public conscious.

Apple has not been the only story stock during the past few years, but it is the one that has held attention the most as each product release has been bought into with the frenzy of Cabbage Patch Kids. So, when talk begins to shift from the market to Apple, a company and product that is heavily discussed , to me this indicates a further shift in public sentiment. For the time being nothing seems to have shaken out the bullishness during this massive sell off even with volatility the likes not seen since the Great Depression. The mentality remains to buy this dip and APPL is still the star of the show. Should APPL fall a little further from the tree, perhaps a shift will take place but thus far...

“The S&P 500 appears to be firmly in the jaws of bears, but data actually show that U.S. investors are slowly turning bullish on equities again. Mutual fund data from research firm TrimTabs suggests that retail investors are bottom-fishing, dipping a toe into the pool of U.S. stocks.   ...TrimTabs says that preliminary figures show that U.S. equity mutual funds saw inflows of $6 billion on Aug. 15 and Aug. 16 after redeeming $41.8 billion in the previous 12 sessions.“

source: http://www.thestreet.com/story/11224173/1/investors-turn-bullish-as-market-crumbles.html

Additionally, the AAII sentiment indicator has increased in bullishness and decreased in bearishness over the past two weeks. On the other hand, one indicator that has shown some bearishness sinking in as of late is the CBOE Put/Call Equity Ratio which has crept up during the past week to 1.04, the second time this reading has dipped above 1 during the past two weeks.

With a number of market breadth indicators yet again showing extreme readings it a useful reminder that a number of them also showed extreme readings on the way up which persisted for months at a time. It is also important to keep in mind that what has occurred over the past three weeks is an outlier and as such breadth indicators that are relied upon under more “usual” circumstances may not return the expected out look. The market can continue to deteriorate and push these readings further than any expectation.

As a side note, the local Border's has been holding a going out of business sale since July 22^nd and I figured the inventory of interest to me would be long gone so I never bothered to pop by to see what remained. A couple of days ago I was in the neighborhood so I did, and to my surprise I found two trading books I wanted for 50% off. Sure I could have waited longer and tried to get 60%, but there was neither a guarantee they would be available at that price or still in inventory.

Is the merchandise the market is putting on sale price today sufficient to incur interest or is there still a lack of demand to buy at these prices as inventory sits on the shelf languishing? Sentiment thus far indicates that the prevalent belief is that this market is on sale at a discount, but judging the the put/call ratio the past few days, concern is beginning to creep in as well. Trading against the public when there is conviction is much different than when the public becomes uncertain for in that frame of mind they are more capable of doing anything- perhaps even panicking.