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Too Much Pessimism

I have been using weakness in the past week to further expand my longs. I thought that we would see a turn in the early part of last week but it took until Friday for that turn to occur. There are even more  indicators pointing to excessive pessimism than there were a week ago:

  • Rydex traders are positioned nearly as bearishly as they have been all year.
  • Hulbert newsletter writers are recommending an outright short in the S&P 500, which is not seen very often.
  • Both Investors Intelligence and AAII bears are at the highest levels in a  year.
  • The market is deeply oversold

The oversold reading, the excessive pessimism and the very strong seasonality help make  a very strong case for the long side. I am positioned aggressively long.