Earnings, Buybacks Save Market From Deeper Correction Amid Dwindling Sentiment

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Over the last two weeks, the bullish sentiment index has reversed from extreme greed to fear. The composite net bullish sentiment index, comprised of professional and retail investors, fell from 38.15 to 9.9 in two weeks. The previous drop between July and October last year was similar and marked the bottom of theBuyers will become more scarce as they refuse to pay a higher price. When sellers realize the change, they will rush to sell to a diminishing pool of buyers.

Very quickly, as supported by the bullish sentiment index, those bulls are turning bearish and are now calling for a more profound decline. While such is possible, I suspect most of this correction is complete for two reasons., in particular, exceeded estimates by a wide margin. However, overall, and most importantly, earnings growth has continued since the October lows of 2022.

“Notably, since 2009, and accelerating starting in 2012, the percentage change in buybacks has far outstripped the increase in asset prices. As we will discuss, it is more than just a casual correlation, and the upcoming blackout window may be more critical to the rally than many think.”of corporate buybacks coincided with more extreme readings in the bullish sentiment index.

 

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