When you lose the retail crowd…
For 23 consecutive weeks, the spread between professed bulls and bears in AAII’s individual investor survey sat above the long-term average.
That streak came to an end last week, when the S&P 500 suffered its worst selloff since 2023’s regional banking drama. Nevertheless, the bull share was still higher than the bear share, making 24 consecutive weeks of a positive spread.
As of this week, that streak’s over too. Although the bear share was actually a tick lower from the prior week (33.9% versus 34%), bulls appeared to turn neutral en masse, flipping the spread negative.
This week’s bull share, 32.1%, was the lowest since early October, when a vicious long-end rates selloff was entering its third month, to the deep chagrin of equities.
Does this matter? It’s “dumb money” after all. The short answer’s “no.” No, it doesn’t matter because all that counts over the next several sessions are Friday’s core PCE reading and earnings from Microsoft, Alphabet, Amazon and Apple.
But it matters to the extent it’s another manifestation of a zeitgeist shift. Although vol-selling flows returned earlier this week, recall that demand for downside hedges outstripped (or at least offset) vol supply last week, in what you could call the “pro” version of the same shift.
That said, in the absence of a sustained selloff/vol expansion, the Pavlovian response function will continue to dictate that retail investors buy stock dips and pros sell vol rips. As IB’s Steve Sosnick put it, “‘buy-the-dip’ [is] still firmly in place” among the broker’s customers.
Today’s tape definitely has a “gamma gravity” feel to it.
Updated earnings tracking. 27% of S&P 500 has reported 1Q24.
Weighted by market cap, 62% beat 1Q rev cons, 87% beat 1Q EPS cons, 39% saw 2Q rev cons rise, 40% saw 2Q rev cons rise, average price reaction +0.5%.
Unweighted, 57% beat 1Q rev cons, 80% beat 1Q EPS cons, 42% saw 2Q rev cons rise, 41% saw 2Q rev cons rise, average price reaction +0.0% (+0.03% to be more precise).
(“Price reaction” is price change from report date -1 to report date +1. Using a two-day period is crude but simpler than dealing with the pre-market reporters differently than the after-market reporters.)
Looking at consensus S&P 500 index estimates over the past two weeks (4/12 to 4/24).
For CY2024E, sales/share has gone down a tiny bit ($1918.06 to $1917.90) and EPS up a tiny bit ($241.37 to $241.70).
For C2Q24E, in the past two weeks sales/share has gone up a tiny bit ($471.69 to $471.94) and EPS up a tiny bit ($59.21 to $59.31).
Over that period (4/12 to 4/24) the S&P 500 index is down 1.6%.
Lots of drama at single-stock level, less so on zoomed out view.