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11 Signs This Rally Isn't Over

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Lingering skepticism could have bullish implications this earnings season.

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Stocks took a breather last week, with the Dow Jones Industrial Average (INDEXDJX:.DJI) ending four of five sessions in the red. Nevertheless, the blue-chip barometer and S&P 500 Index (INDEXSP:.INX) found support atop their 50-day moving averages, while the tech-rich Nasdaq Composite (INDEXNASDAQ:.IXIC) found a familiar foothold in the 3,040 neighborhood.

However, as Ryan Detrick points out, there's mounting evidence to suggest this pullback is just a blip amid the longer-term uptrend. In fact, we haven't yet reached the sentiment stage that marks market tops, meaning there's still plenty of sideline cash to fuel further upside.

Notes from the Trading Desk: We Aren't Even Close to Euphoria
By Ryan Detrick, Senior Technical Strategist

Last week, Schaeffer's Senior VP of Trading Todd Salamone warned of some short-term issues, and said to be on the lookout for some weakness -- and that was exactly the case, as the Dow Jones Industrial Average dropped the first four days of the week before edging higher on Friday. Overall, Todd has done a great job of navigating you through the market this year. He's been bullish throughout, but noted and nailed some times of potential weakness. This week, I'll take a much bigger-picture look at things, and reveal why this market still could go much, much higher.

Our methodology here at Schaeffer's says markets bottom at despair (think March 2009), and begin to rise on disbelief. Eventually, the bull market finds acceptance (this can be the longest stage), and then the blow-off top ends things with euphoria (think tech in 1999 or housing in 2007). In fact, one of the easiest ways to sum up why we've been so bullish for more than three years is very few investors believe this rally. The old saying "The market climbs a wall of worry" is alive and well.



What is fascinating with the current bull market is there are still signs of disbelief! Sure, there are signs of acceptance, but one thing's for sure: we aren't anywhere close to euphoria. There are many ways to measure market expectations, and one of my favorites is what we call anecdotal sentiment. This one is very tough to quantify, as it can best be summed up as what you might hear at a cocktail party or what the talking heads are saying on TV. If everyone around the Thanksgiving table is talking about buying gold, you know gold is about to peak. That's how best to summarize anecdotal sentiment.

Anecdotal evidence usually has a much smaller sample size, and the chances it could be cherry-picked are greatly increased. Nonetheless, finding solid examples of negative anecdotal sentiment could very well be some of the most powerful reasons to stay bullish, even after all of the massive gains we've seen the past three years.

Below is a list of the top 10 negative anecdotal sentiment indicators. Remember, one or two by themselves could be arguably "random" and not viable as reasons to stay bullish. But when all are taken together in context, the odds that this bull market has a long way to go in terms of both price and time till we reach euphoria are very real.
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No positions in stocks mentioned.
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