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Durable Goods Miss! Time for Bears to Put Up or Shut Up

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This morning we can add weaker-than-expected durable goods orders for July to the laundry list of reasons to be scared of stocks. The Commerce Department announced that durable goods (think washing machines and computers) fell 7.3% in July, well short of the 4% drop economists had been expecting. The data come on top of poor earnings reports from the retailers, dour GDP figures, and generally horrible statistics across the board.

Just about the only thing not coming in worse than expected is the stock market. For the last 3 months we've had nothing but Hindenburg Omens, whining about complacency, and chilling comparisons to 1987. Quietly the message has taken hold among individual investors. The widely watched AAII Investor Sentiment survey for the week ending last Wednesday showed a 14.7% rise in self-described bears and 5% drop in bulls. Investors polled by AAII.com haven't been this bearish since the middle of April.

Related: Hindenburg Omen: Very Ominous, Highly Technical Warning Sign Returns

It's worth noting that the S&P 500 (^GSPC) rallied more 7% in the month following that peak in bearish sentiment.

Corrections are a function of time and price. Stocks are off 3% since the S&P 500 closed at its all-time high on August 2nd. Over the last month the bears have been emboldened but they still aren't making any money. "Sometimes these bear-phobic periods die of old age," Nesto points out in the attached clip.

Related: Pain Trade Is Higher as Risky Season Approaches: Technical Analyst

In terms of the technical picture there's support in the 1,650 area, and better support around 1,600. If you feel the need to put on trailing stops, those are your price points for an "if... then" sell-off scenario. The bottom line is the longer stocks hang around in this price range the worse its going to be for the bears.

The emotional set-up of the market is this: bulls are looking to buy dips and bears are waiting to say "I told you so." As a general rule, traders on Wall Street know the adage "money talks and bull$%&# walks," still applies. Unless stocks start pulling back in earnest soon, there are going to be a lot of investors doing the walk of shame by the end of the year.

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