NDR: Excessive optimism relieved, now what?

NDR clients know we like to take a 360-degree look at the overall market environment when making trend assessments. We have been sounding the alarm for several months about the underlying weakness in the economy. Just last Thursday, our macro team shocked everyone with a prediction of only "95,000 new jobs in July," a far cry from the 175,000 consensus estimate. In Friday's Hotline, NDR's Chief Global Macro Strategist, Joe Kalish echoed these concerns, warning that "aggressive positioning makes less sense as slowdown risks loom."

We are hopeful that the Fed will take action soon to support the economy and bolster the stock market.

One of our key concerns with the bullish trend was the excessive optimism leading to an overbought short-term condition. However, during the recent market selloff, we saw a significant drop in this optimism, signaling a shift in sentiment (chart above). So, while there is reason to be cautious, the downturn relieved an overheated sentiment situation, likely laying the groundwork for a continued uptrend in this bull market.

Stay tuned for more insights from Ned Davis Research as we delve deeper into the dynamics shaping the economic landscape and offer actionable strategies for investors. Let us help you See the Signals.™