David I. Templeton

About the Author David I. Templeton

HORAN Capital Advisors (http://www.horancapitaladvisors.com) is an SEC registered investment advisor that manages investment portfolios for individuals and institutions. Our firm utilizes a disciplined investing approach that should create wealth for our clients over time. Our investment bias is to invest in companies that generate a steady return over time, i.e., singles and doubles. This singles and doubles approach tends to lead to investments in higher quality dividend growth/cash flow growth companies. On the other hand, there are times when a company's stock price seems to be trading below its fair valuation. Short term gains are possible in these situations. I have been managing investment portfolios for individuals and institutions for over fifteen years and believe investing is like running a marathon and not a sprint. Taking the road less traveled, more often than not, leads to higher returns. Visit: The Blog of HORAN Capital Advisors at (http://disciplinedinvesting.blogspot.com/)

S&P 500: Weak Investor Sentiment Yet New Equity Market Highs

Today the S&P 500 Index closed at another all time record high. This higher advance in the market is becoming a regular occurrence as this is the fourth consecutive week for the market to close higher on a weekly basis. From the market’s intraday low on February 11th, the S&P has advanced over 20% on a price only basis.

The magnitude and trajectory of the move higher is seen more clearly on the daily chart below.

Somewhat interesting is the fact individual investor bullish sentiment as reported by the American Association of Individual Investors is far from indicating excess optimism. This weeks bullishness reading of 35.43% was a decline from the prior week’s reading of 36.87%. ┬áThe long term average bullishness level is 38.5% and bullish sentiment has not exceeded this level since early November of last year.

So given the strength of this move in the market since February, and reviewing some of the technical market indicators, a pullback would not be surprising. However, in a June 2nd article I posted, Is It Right To Be Bullish Near A Record Market High?, I noted:

“Being bullish after a double digit market decline seems a lot easier than being bullish near market tops. Knowing the market does not move up or down in a straight line, are there factors we see that would support higher equity prices? In the intermediate and long run, we believe fundamental company and economic factors are key drivers of stock price returns.”

Our view that company and economic data will continue to remain favorable is unchanged from early June.

Lastly, Ryan Detrick, a strategist at LPL Financial, provided a link to one of his firm’s recent research reports, Is an Overbought Condition Necessarily Bad for the Stock Market?. This research article is a worthwhile read for investors. The conclusion might surprise some readers. In the end, the market will not move higher in a straight line; however, this longer term trend seems to be a friendly one for investors at the moment.


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