Daytrader: A surprisingly large subset of market strategists, traders, investors, and informed pundits subscribes to a view that world financial markets will implode, tomorrow. Armageddon will ensue and cities will burn. The overwhelming sentiment of this sleuth of permabears is that the next crash will be cataclysmically worse than the post-Lehman bloodletting. Their logic boils down to an opinion that badly rated, priced and traded Credit Default Swaps, a major factor in the last financial crisis, are child’s play compared to the toxic mixture of political incompetence, QE and sovereign default risk which confronts today’s markets. Think social uprising–Armageddon. They have an argument.
Merrill Lynch, itself bankrupt and pawned-off to Bank of America in 2009, recently published statistics on market sentiment proposing that bearishness is a bullish signal and vice-versa. This predictably makes a muddle. On average (over a 15 year period) Merrill speculates that nearly 7 out of 10 traders are optimistic, and that today only 4 out of 10 are in this happy state. So Merrill is suggesting we buy into the markets because 6 out of 10 market participants expect future pain.
