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So the Wall Street Journal runs a piece on the front page today titled, “Pivot Point: Investors Lose Faith in Stocks:”

…a sea change is taking place. Investors are abandoning the time-tested “stocks for the long run” optimism that dominated since the late 1980s. Instead, there is a widening belief that the mess left behind by the housing bubble and financial crisis will be a morass to contend with for years.
In a historic retreat, investors world-wide during the three months through August pulled some $92 billion out of stock funds in the developed markets, according to data provider EPFR Global—an exodus that more than reversed the total amount of money investors had put into those funds since stocks bottomed in 2009. The withdrawals matched the worst three-month period during the depths of the financial crisis.
That reversal showed no sign of abating in September. In the first three weeks another $25 billion was withdrawn from developed-market stock funds. Last week the Dow Jones Industrial Average suffered its worst one-week decline since October 2008. It is down 16% from its late-April peak. Investors are also showing less optimism toward emerging-market countries.

And immediately I’m reminded of the Business Week, “Death of Equities,” cover story. If you haven’t heard of it here’s the scoop. Just before the generational bottom the stock market made in 1980, Business Week ran a cover story that argued equities were no longer a viable investment.

At least 7 million shareholders have defected from the stock market. And now the institutions have been given the go-ahead to shift more of their money from stocks and bonds into other investments. Further, this “death of equity” can no longer be seen as something a stock market rally, however strong, will check. It has persisted for more than 10 years through market rallies, business cycles, recession, recoveries, and booms
“It will take two or three years of confidence building, of testing, before the market can seriously act like it did earlier,” says William J. Fellner, a professor of Economics Advisers.
The problem is not merely that there are 7 million fewer shareholders. Younger investors, in particular, are avoiding stocks. Even if the economic climate could be made right again for equity investment, it would take another massive promotional campaign to bring people back into the market.
Says Alan B. Coleman, Dean of Southern Methodist University’s business school: “We have entered a new financial age. The old rules no longer apply.”

These types of stories are usually very good contrary indicators and it looks like the WSJ piece may turn out to be. Technically, there are signs that we may be close to a bottom.

The NYSE Composite made a new low last week:

But the Nasdaq did not. This is a classic non-confirmation:
Both indexes are historically very oversold:
Dr. Copper made a massive hammer formation today:
The Russell 2000 and the Dow look to have possibly formed a double bottom:
And on the fundamental side of things, stocks have gotten pretty damn cheap based upon trailing 12-months earnings:
So we have a positively contrarian reading on sentiment along with arguably bullish technicals and the cheapest price-to-earnings ratio since 1990. I’m not saying that we’re are currently witnessing another generational low. But I will say that, at the very least, to bet on further downside from here would be imprudent.

Hat tip, Paul Kedrosky