Flat for Five Months and Sentiment Is Turning: What Investors Should Watch
100 points in five months is hardly something to brag about, but here's what's really weighing on sentiment now. Plus, thoughts on Nvidia.
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If you are a growth stock investor the last few months have been pretty brutal. But we all know that. Do you realize that if you are an index holder — think of all those (SPY) and (QQQ) holders — you haven’t made a penny either?
The good news is you haven’t lost! But the Nasdaq closed at 22,788 on September 22. On Thursday it closed at 22,878, so in five months it has gained exactly one hundred points. The S&P is no better.
I thought of this because recently I met this man who discovered what I do for a living and then bragged to me that he just has all his money in SPY. It made me wonder how many others are like him, or maybe they own SPY, QQQ and Nvidia (NVDA) and maybe Apple (AAPL) . Aren’t these the stocks that have been working for the last decade?
So maybe it’s the traders who have goosed those options ratios to the point where their moving averages are all close to the levels we saw them at in the spring of 2025. And maybe it’s the man I recently met who has started clicking "bearish" in the American Association of Individual Investors (AAII) weekly poll, since the bulls have tailed off to 33% while the bears have lifted to nearly 40%.
What about the professionals? Oh not the hedge-fund guys, I mean the wealth managers. A check on the National Association of Active Investment Managers (NAAIM) shows they have taken their exposure down to 75. It is still quite far away from the just-under-40 level we saw during the Tariff Tantrum, but it is back to where it was in May. Sentiment is turning.
I am not sure I have ever seen folks get so cautious when the index sits in a sideways pattern but we do have growth stocks which have been a lot less growthy than they have been for the last decade (or more) and that is weighing on sentiment.
So what happened to sentiment on Thursday? There is some warming up to software now. All of a sudden folks seem quite keen to consider "the bottom is in!" I will reiterate my view that I think we got some panic and are enjoying a rebound and that we’re in that part of the cycle where the charts are sorting out the winners and losers and that requires a lot of ups and downs. We can trade them but that’s it.
We get yet another test for them on Friday when we see if the buyers will step to the plate as they have for the past three days. For now I view this as an oversold bounce that was filled with too much bearishness.
And I know everyone is upset with Nvidia but the semis got overbought three weeks ago and all they have done is meander. If NVDA breaks $170 I would consider that bearish, otherwise it’s all sideways action to me.
I will leave you with the chart of the Nasdaq McClellan Summation Index because net volume on the Nasdaq was positive on Thursday, despite the nearly 300-point decline and that means the Summation Index has stopped going down.
The Nasdaq will be back to being a little short-term overbought early next week.
