Market Tops and Sentiment: Let's Light This Candle!

Do you remember Stuart the office boy and his boss, Mr. P?

With the major indices challenging old highs, many will raise questions about whether we are hitting a market top.  While there are plenty of differences between current market conditions and those of 1999-2000, starting with the key elements of earnings and interest rates, we would like to focus on the absence of some traditional signs of market tops.

Let me introduce the CNBC Advertising Indicator, another entry in our developing series about improving the measurement of sentiment.

My thesis is that CNBC does demographic research to sell advertising.  Advertisers look at that research when choosing what ads to develop and buy.  They can spend more on market resesarch than I can, so I pay attention!  Current advertising has two interesting characteristics:

• Ads aimed at the individual investor emphasize active traders who do technical analysis and might want to backtest their strategies.  You cannot watch for long without seeing several examples of this genre.
• There is a virtual absence of mutual fund advertising emphasizing performance, a dramatic change from the old days.  This is a dog "not barking in the night."

As long as individual investors are buying real estate, commodities, and trying to figure out how to get into hedge funds, it is likely not a market top for equities.  As I was trying to explain the difference in advertising to my staff, I realized that they were not on board when the ads had a completely different character.  I searched my memory for a good illustration and came up with Stuart!

I plan to develop this with more examples (remember the taxi driver who made enough trading to buy an island?) but for now, let's start with this blast from the past.  My search for the Stuart Ameritrade commercial led me to a wonderful site, Wall $treet Folly.  Sure enough, they had found the Stuart commercial on YouTube.  Take a look, have another laugh, and note the difference between then and now.  In those days, anyone and everyone was trading....even Mr. P.

UPDATE 9/27:  For those having trouble checking out Stuart from these links, you can also try our site here.

Comments

[oldprof]

Great point, Muckdog!

Anyone watching CNBC knows that you can retire at age 30 or so if you just learn about channeling!

[muckdog]

C'mon, JM. Stocks trade in a channel. You buy them at the bottom of the channel. You sell them at the top of the channel. Channeling stocks. Why make it anymore complicated than that?

;)