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LIVE MARKETS-Streaking bulls may leave the market exposed

Fri 18th December, 2020 3:47pm
* Major U.S. indexes modestly red; small caps outperform * Euro STOXX 600 index off ~0.3% * Brexit talks angst hits again * Dollar, crude up; gold slips; U.S. 10-year Treasury yield ~0.93% Dec 18 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at STREAKING BULLS MAY LEAVE THE MARKET EXPOSED (1039 EST/1539 GMT) The percentage of individual investors describing their six-month outlook for stocks as "neutral" rose to a six-week high in the latest American Association of Individual Investors (AAII) Sentiment Survey. That said, streaking bulls may leave the market exposed. AAII reported that neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, bounced 5.2 percentage points to 30.3%. Even with the gain, neutral sentiment remains below its historical average of 31.5% for the 47th time out of the past 49 weeks. Bullish sentiment dropped 4.6 percentage points to 43.4%. Optimism is above its historical average of 38.0% for the sixth consecutive week. Bearish sentiment fell 0.6 percentage points to 26.3%. Pessimism is below its historical average of 30.5% for the sixth consecutive week. AAII stated that bullish sentiment is back within its typical range. In any event, it remained above 40% for the sixth consecutive week. This is the longest consecutive weekly streak since an eight-week stretch between December 14, 2017, and January 31, 2018. Of note, the S&P 500 .SPX topped on January 26, 2018, and promptly slid as much as 12% over the next 10 trading days. With these changes, the bull-bear spread declined to +17.14 from +21.2 last week*:nL1N2IR1F9: In this week's special question AAII asked its members to share their opinion about the DoorDash DASH.N and Airbnb ABNB.O IPOs. A little under half of all respondents (46%) said that the IPOs are priced too high. This compares to about 18% of respondents who said that they do not typically buy IPOs. About 17% of respondents stated that they are not interested in the IPOs. In addition, about 9% of respondents said that they think the IPOs are risky bets. (Terence Gabriel) ***** DOW INDUSTRIALS: All COILED UP, AND ABOUT TO HISS? (0900 EST/1400 GMT) The Dow Jones Industrial Average .DJI , over the past month or so, has been coiling within what may be an ending diagonal, or rising wedge-like pattern. (Click on chart below) Of note, after hitting an intraday high of 30,325.79 on Monday, the blue-chip average immediately retreated. Since then, and despite a fresh closing high on Thursday, the Dow has yet to take out that intraday peak. Premarket futures' 1YMcv1 action, on this quadruple-witching Friday, suggests the Dow will deflate slightly at the open.*:nL1N2IX1D2 If the high is in place, and the Dow were to close below the support line from November 20, which is now around 30,025, there will be potential for a surprise collapse as the ending diagonal can terminate with a swift and sharp downside turn that leads to a significant trend reversal. In the event the Dow can thrust to a new high, and then take out the log-scale resistance line from its 2000 top, and the pattern's upper boundary, now around the 30,450/30,500 area, a sustained advance will need to develop. The next hurdle can be the resistance line from early 2018, now just over 30,900. Any quick spike, or throw-over, followed by a vicious reversal, could also signal the ending diagonal was terminating in a bearish fashion. Meanwhile, perhaps not surprisingly, given the narrowing price action, volatility close-to-close recently collapsed to its lowest level since late January. Thus, the Dow appears poised to strike, one way or the other.*:nL1N2IV172*:nL1N2IO11S (Terence Gabriel) ***** FOR FRIDAY'S LIVE MARKETS POSTS' PRIOR TO 0900 EST/1400 GMT - CLICK HERE:*:nL1N2IY138 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Dow12182020 AAII12182020 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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