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Fundranker Blog—Correction Lingers

Correction Lingers

The S&P 500 Index (as measured by Fidelity’s Spartan 500 Index - Investor Class Fund), the Nasdaq Composite Index (as measured by Fidelity’s Nasdaq Composite Index Fund), and Fundranker’s Top Eight Model Portfolio remained in correction as of June 9, with losses of 13.0%, 14.6%, and 15.0%, respectively, from their April 23 bull market highs. In the first seven trading days of June, they lost 3.0%, 4.3%, and 5.4%, respectively, to add to correction woes that began in the last week of April and continued through May.

Contrarians still call for a short-term rally, however, because investor sentiment has turned down so dramatically. Mark Hulbert pointed out in a recent article that, as of June 8, the market was at about the same place it was during the last correction in January and February. At that time, the Hulbert Stock Newsletter Sentiment Index stood at 20.3%, meaning that market-timing newsletters in the Index recommended that their subscribers put 20.3% of their portfolios in stocks, on average. As of June 8, however, the HSNSI stood at negative 8.8%, meaning that newsletters in the Index recommended that their subscribers short the market with 8.8% of their portfolios. That’s quite a change in sentiment.

Contrarians contend that bull markets like to climb a “wall of worry.” This morning, June 10, the market is up over 2%. Perhaps they are right.

Posted 6/10/10 11:49am ET in Fundranker, Market