{"id":61283,"date":"2013-02-11T10:54:51","date_gmt":"2013-02-10T23:54:51","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2013\/02\/11\/is-this-the-death-knell-for-the-bull-market\/"},"modified":"2013-02-11T10:54:51","modified_gmt":"2013-02-10T23:54:51","slug":"is-this-the-death-knell-for-the-bull-market","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2013\/02\/11\/is-this-the-death-knell-for-the-bull-market\/","title":{"rendered":"Is This The Death Knell For The Bull Market?"},"content":{"rendered":"

\n\tby Alexander Green, Investment U Chief Investment Strategist<\/em><\/p>\n

\n\tWell, it had to happen eventually. The average punter is finally returning to the stock market. (Or, as the little girl said in Poltergeist, “They’re baaa-aack.”)<\/p>\n

\n\tWe have more than just anecdotal evidence. TD Ameritrade<\/span>, the Omaha-based online broker, registered an average 370,000 trades per day in January, up from 30,000 trades a day in December. And, according to data from TrimTabs<\/span> Investment Research, investors funneled $55 billion into U.S. equity funds in January, the most ever for any month on record.<\/p>\n

\n\tI have spoken to several brokers and money managers who also confirm that long-dormant clients are finally investing in stocks again. “They sense that the fiscal cliff was overhyped<\/span>,” one broker told me. “The euro zone is not coming apart. And they are sick and tired of earning nothing on their income investments.”<\/p>\n

\n\tOf course, there’s another big reason average investors are finally warming up to stocks again…<\/p>\n

\n\tThey’ve been missing the boat.<\/p>\n

\n\tSignaling a Top?<\/strong><\/p>\n

\n\tLast week the Dow closed above 14,000 for the first time since the financial crisis hobbled the global economy. Small investors – having missed out on the last 7,500 points – don’t want to miss any more.<\/p>\n

\n\tSome analysts say the return of the small investor is a signal that the bull market, already nearly four years old, may soon give up the ghost. They point to the Odd Lot Indicator.<\/p>\n

\n\tAn odd lot is an order for stock of less than 100 shares, or a round lot. Historically, small investors could not afford to buy a round lot so when odd lot orders started coming through, the pros recognized that smaller investors were buying into the market. That was viewed as the market top. Or as JFK’s father Joe Kennedy put it, when the shoeshine boy starts giving you stock tips it’s “time to get out.”<\/p>\n

\n\tThere is some evidence to back this view. For instance, a 25-year study published a few years ago in the Journal of Financial Economics found that if you had simply invested in the S&P 500 when equity fund flows were negative (redemptions<\/span> exceeded new investments) and into 90-day Treasury bills when fund flows were positive (new investments exceeded redemptions<\/span>) you would have substantially outperformed the market while spending nearly half the time in riskless<\/span> T-bills.<\/p>\n

\n\tMutual fund flows just turned heavily toward equities. Does that mean the end is near?<\/p>\n

\n\tNot Likely…<\/strong><\/p>\n

\n\tHistory shows that small investors are only a good indicator at market extremes. They tend to be wildly optimistic at market tops and wholly pessimistic at market bottoms. For two perfect examples, think about how they felt about real estate as an investment at the top of the housing bubble and stocks as an investment at the bottom of the financial crisis. Their instincts – based on greed and fear – were dead wrong.<\/p>\n

\n\tThe Odd Lot Indicator only works as a sell signal when valuations are high and sentiment is euphoric. Neither is the case today. The market sells for less than its average P\/E ratio of 16. And while investors may be feeling a bit more positive lately, it’s hard to sense anything like euphoria out there.<\/p>\n

\n\tWhen we do, it will indeed be time to trim back stock positions. But that is still a ways in the future. In the meantime, we should welcome new stock market investors – and their influx of cash that is pushing our shares higher.<\/p>\n

\n\tGood investing,<\/p>\n

\n\tAlex<\/p>\n

\n\tReprinted with permission of the publisher. The above story can be read on the website www.investmentU.com. The direct link is: [LINK]<\/a><\/em><\/p>\n

\n\tNothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.<\/em><\/p>\n

\n\tViews expressed are not by association FNArena's (see our disclaimer).<\/p>\n

\n\tFind out why FNArena subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

As money floods back into equities marlkets some analysts worry this almost four year old bull market may soon be at an end.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61283"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=61283"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61283\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=61283"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=61283"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=61283"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}