The Week Ahead : Investors - Fight These Fears

As investors and traders head into the long Memorial Day weekend the S&P 500 is once again close to the April highs and the widely watched 2100 area. This is despite the raft of negative headlines that filled my inbox this week, including: The Market Is In For A Shock, A Market Under Pressure, Prepare For A Recession and The Recent Rally May Be A Head Fake. It appears that many hedge funds and banks are short the stock market as they are looking for another rally failure. In last week's column "Avoiding The Big Money Blues" I pointed out the hazards of following the hedge funds or well known money managers. Often when a majority of these big traders are on one side of a trade the market goes in the opposite direction. Last week's action in gold was a good example. There were early signs from the market internals last week that the recent trading was not going to lead to a sharper correction and a new rally phase was more likely. The evidence was strong enough for me to recommend that Viper ETF traders buy several ETFs that ended sharply higher. This end of the correction was confirmed last week ( Uncovering Best Of Breed Stocks) as the Nasdaq 100 A/D line "moved above its WMA and the May 10th high". As stocks continued higher through the week the technical studies have gotten even stronger. (See Market Wrap section) Surprisingly, despite the strong stock market only 17.8% of individual investors are bullish according to AAII who pointed out "This is the lowest level of optimism recorded by our survey since April 14, 2005". The very high neutral reading also goes back over 16 years. So what fears are keeping investors from buying stocks?