Bulls and Bears Back Down

Oct 19, 2023

The S&P 500 has fallen over the past week, and that has given sentiment reason to shift lower.  The latest sentiment survey from AAII showed only 34.1% of respondents reported as bullish this week, down from 40% last week. That 5.9 percentage point decline is the largest single-week drop in a month although bullish sentiment is still above levels from two weeks ago.

Even though bullish sentiment dropped, those losses did not flow into bearish sentiment. In fact, bearish sentiment also fell by 1.9 percentage points. On top of the 5.1 percentage point decline in the prior week, at 34.6% bearish sentiment is unchanged versus one month ago.

The larger drop in bulls versus bears did result in the bull-bear spread shifting back into negative territory. While not a wide margin, bears outnumber bulls.

Neutral sentiment came in with the lowest reading in a year last week implying increasingly polarized investor sentiment. However, the declines in both bulls and bears this week resulted in neutral sentiment to climb up to 31.3% which is the highest reading in three weeks and right back in line with the historical average.

Continuing Claims Conflict With Initial Claims

Oct 19, 2023

The back half of September into the first couple of weeks of October saw jobless claims rebound off their lows.  Last week saw that rebound grow with a modestly upward revision to 211K. However, there was a substantial improvement this week with claims dropping to 198K and back below 200K for the first time since the last week of January. That compares to expectations for a reading of 210K.

On a non-seasonally adjusted basis, that improvement is even more impressive.  Claims totaled a meager 181K. For the comparable week of the year, the only years with lower readings were 1967 through 1969.  While the one-week move is impressive and indicates claims remain at historically strong levels, this time of year has historically seen claims drift higher into year’s end.

While initial jobless claims had a positive move, continuing claims are sending a conflicting signal.  After seasonal adjustment, continuing claims have risen for four weeks in a row and are now at the highest levels since early July.