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The ISA Weekly Report for 12/6/4-12/9/4


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#1 TTHQ Staff

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Posted 09 December 2004 - 11:45 AM





Institutional Sentiment & Analysis Weekly Report
for the week from 12/6/4 to 12/10/4

Response was to this question: "At the end of next week will the S & P 500 closeup (bull), down (bear), or unchanged/no opinion (neutral)?"
 

Weekly BULLS:  30%
Weekly BEARS:  43%

Our `Smart Money' Pollees are twice as Bearish as they are Bullish and not at all Neutral.

The Senticator is Neutral.




Last time, I advised not getting too Bearish too soon because of the strong seasonality,but I also thought that we should be open to some selling, anyway. I called for lowerprices on Monday, and perhaps Tuesday and I figured that were pessimism to rise on thedecline, I would expect a low by Wednesday and then a rally and if folks were buying thedip, I thought we could look for a modest bounce on Wednesday, and then lower prices rightinto Friday. We were down on Monday and Tuesday, and we did bounce on Wednesday, though Idon't think we should call it modest. We then drifted slightly lower into Friday. I thinkthat we cam fairly close on that call, though the power of Wednesday's move made it hardto make money. On that alone, I think we have to take a C+ for that call.

Last week, the Mechanical model went short the SPY at 118.79 and our Subjective model wentshort 1/2 SPY at 118.25 and another half at 118.79. These positions were closed at theclose on Friday at 119.25 for a modest loss. This one was frustrating, because we werewell positioned and narrowly missed closing out at a nice profit.

The Senticator is neutral, and the Fearless Forecasters and Smart Money pollees aremodestly Bearish. This last week's action was probably the stuff of tops, but we know thattops are built and that takes a bit of time. Without the Senticator being Bearish, it'shard to be too Bearish for next week.

The message board sentiment poll shows Bulls at 50% and Bears at 35%. That's plenty ofBulls and generally suggests too much confidence. The Actual Position Poll shows 38% atleast partially long and 43% at least partially short. There are 23.81% of the polleesfully short. This divergence of opinion is odd, but I note that participation isparticularly low in the Actual Position Poll. I suspect that these numbers will change byMonday morning. We'll have to see. Otherwise, I view the data as inconclusive.

The equity P/C ratio fell to 0.54, which is near a Sell again. The Dollar-weighted P/Cratio fell to low 0.29. That's still solidly in sell territory. The VIX didn't do much,but a close above 13.50 could signal a more serious correction. The 10-day Equity P/Cratio has pulled back, but still suggests that we are closer to a top than a low.

Last week, AAII reported 57% Bulls up from 49% (corrected) last week and 25% Bears, downfrom 29% (corrected) last week. This data is showing plenty of Bulls again, and most ofthe rally is not reflected in those numbers--use care. Investors Intelligence reported57.1% Bulls, vs. 58.2% last week, and 23.5% Bears, vs. 22.4% last week. There was a modestshift to Bearishness, but this remains worrisome. LowRisk reported 33% Bulls, down from43% last week, and 53% the prior week. Bears were at 30%, which was even week-over-week,and up from 22% Bears the prior week. This suggests that the market will probably find itsfeet again soon, but not just yet.

The Rydex Dynamic Bull fund assets decreased by $30MM, while the Dynamic Bearish fundassets increased by $26MM. We had modest modest shifts out of the Bull funds and out ofthe Bear funds for the most part, so the large shift was due to one large swap out ofVelocity and into Venture. This is that same timer who has been aberrating the numbers allweek. I'm not going to read to much into that shift. The RSO showed a solid Bearish shift,but this was due to the Velocity-Venture move. We are going to view the shifts as largelyconsistent with more pullback, despite the Big RSO shift.








The Senticator is neutral, and there's a modest preponderance of FF and "SmartMoney" Bears. The trend is basically positive. The RSO continues to suggest risk ofsome magnitude, should the trend turn for real, and should that happen, we need to bealert for a hard and fast decline. It will likely come when we least expect it. One thingabout the rally on Wednesday: it trained a lot of Bears to be hesitant to short and a lotof Bulls to be slow to sell and quick to buy. That's a set up for a top that has too fewshorts and too many "bag holders". This and the lack of support beneath us makesfor a possibly steep decline. We just don't know when and the indicators aren't much help.That, of course, suggests that the decline could start this week--if only because I can'tsee any hints of it in the data. I'm not going to get cute, however. Until it breaks thatred trend line on the RSO chart, shorting is risky. The ITBM and the Summation index arenegative, though there's some lack of confirmation. Of course, this is the type of obvioushint of trouble ahead that the rally trained folks to ignore. The high ARMS index is verymuch indicative of distribution. My experience says that while picking a top is hard, weare near some sort of decline and it has the makings of a good one. I'm going to look fora small decline on Monday, a slight rally on Tuesday, and lower into Friday. This is not ahigh confidence call, though I will be adjusting this in the Daily Trade Navigator.

The Mechanical model will sit flat. Our Subjective model will go short 1/2 SPY at 119.45.


Not everyone likes a short-term trading model, and would like something that hangs onto bigger moves and reflects a less frantic trading pace. If you want to know how I would trade based upon the big picture and the sentiment, the following tracking portfolio is it.

*****************

Ideal ETF Portfolio (tracking portfolio):

100% Money Market


We are now flat after having sold the DIAmonds for a nice profit. We'll be looking to get long again, but for now, let's be patient in here.


Past performance is no guarantee of future returns. All information included inthis missive is derived from sources we believe to be reliable, but no guarantee can bemade to that effect. None of the forgoing should be construed as an offer or solicitationto buy or sell any security. The publisher may have a long or short position in the fundsor securities discussed at any given time. We aren't your advisor, unless you have asigned contract with us. Please review any trade that you do with your trusted advisorFIRST.

Scroll down to view the Historical Charts of the FearlessForecasters Sentiment as tracked by DecisionPoint.com, on a weekly basis.

Subscriptions to the ISA Weekend Report are $99 per year.  Our polls are unique andinsightful, and our analysis is some of the most accurate on the Street.


Note: The premium daily version of the ISA is now available:

The Trade Navigator is published every single market day before the U.S. market opens.
Includes the original Rydex Speculation Oscillator Chart & SPX comparison data.

The morning analysis of the latest Rydex asset flow data.
Additional sentiment developments throughout the week, like the LowRisk weekly investor poll, the Investors Intelligence and AAII sentiment polls.
The latest message board sentiment poll results in context with the VIX and Put/Call ratios to pick periods of short-term speculative excess.
Specific ETF trading ideas based upon the Senticator.
Plus everything that comes with the ISA Weekend Report!

 

The Trade Navigator is nowavailable for $39.99/month or $399/year.

 


Thanks for your time,


Mark Young
President
Equity Guardian Group, LLC.
Investment Advisory