Weekly Sentiment Survey: Bearish Bias in the First Part of June

We’re in week 3 of our weekly sentiment survey and I think this is getting fun.

Last week was a tough week in the markets. Well, that’s not 100% true. Last Friday was a tough day, with the S&P 500 dropping by 2.6%, which was a hair more than the 2.5% that the broad index lost for the entire week.

Leading into the week, our team was cautious, but most were positioned on the bullish side. Now, it’s important to note that I send out the survey on Thursdays each week, so today’s results are based on that day. In fact, our team was correct to be positioned to the long side. From May 28^th to June 4^th, stocks were actually up. Well done!

So, how do they feel now? There’s a definite bias towards the bearish side, though half of the team can be considered neutral.

Part 1: TheStreet Pro’s Sentiment Survey Results

Question 1

Direction: Over the next 2-4 weeks, how do you feel about the S&P 500?

Score: -1 Bearish

Commentary: We’re back to slightly bearish here, with two bulls, three bears, and three neutral. With Friday’s big down day, looks like the team is on the right track.

Question 2

Positioning: How are you currently positioned?

Score: 0 Neutral

Commentary: The team is neutral here, with two members overweight stocks, two underweight, and the rest neutral.

Question 3

Risk: How would you rate overall market risk?

Score: -4 Elevated Risk

Commentary: No getting around it, our team sees elevated risk levels in the market today. Half of the team rates the market Elevated Risk, while the other half is neutral.

Question 4

Opportunity: Is it time to increase or decrease risk?

Score: -3 Reduce risk

Commentary: While half of the team was neutral, suggesting that no change needs to be made, the other half were a little more spread out. One member suggested adding risk. Two are slightly reducing risk, and the last person is more cautious and is strongly reducing risk.

Question 5

Portfolio Activity

Score: -1 rotating into safer sectors

Commentary: Half of the team remains firmly in the neutral camp. Among the others, however, two suggest rotating into more aggressive sectors. One person is rotating into safer sectors, while the final member of our team is a broad seller of stocks.

Part 2: Qualitative Questions

What companies will have the biggest impact this week?

Semiconductor companies like Broadcom (AVGO), NVIDIA (NVDA), Micron (MU), and TSMC (TSM), as well as other tech names like Apple (AAPL), Ciena (CIEN), Tesla (TSLA), SpaceX, and Adobe (ADBE).

The only non-tech name to watch was Progressive (PGR) and our team member suggested that the stock could be a value play and a diversification hedge against the typical names in the headlines.

What economic data has you most optimistic?

Job growth! Plus manufacturing and the increase in animal spirits.

What economic data has you most pessimistic?

Inflation numbers were the big worry. Government overspending and geopolitics weren’t helping either.

What technical indicator has you the most optimistic?

It’s a momentum game. People are looking at the rising 50- and 200-day moving averages, performance of the mid-caps, and the VIX.

What technical indicator has you the most pessimistic?

When momentum is too hot, that’s a concern. And one member of the team mentioned that the Semis are massively above their 200-day moving averages, suggesting either a pause or a decline. The other big concern was the narrowness of the breadth.

Part 3: Final thoughts

Pretty much any survey is reductionist. The goal is, first, to see if there is any consensus, and then to understand the prevailing sentiment.

In our case, there’s not much consensus. We’ve got lots of people on both sides of the fence. And that’s ok. I hope that over time, we’ll see patterns emerge. The best case is that our team is always right. But it’s more likely that our overall sentiment numbers will help us to understand how traders and investors are positioned, so that we can take advantage of that in our own trading.

Thanks for reading.