The Institutional Sentiment & Analysis Daily Navigator
12/22/04
The message board sentiment poll shows Bulls at 46% and Bears at 38%. That's showing a bit more Bullishness AND Bearishness. The Actual Position Poll shows 39% at least partially long and 36% at least partially short. There are 27.27% of the pollees fully short. The ongoing jump in fully short pollees makes me think that we've more upside and a end of year rally ahead of us, despite all the reasons that we "shouldn't".
The equity P/C ratio fell to 0.51, which is creeping back towards a Sell. The Dollar-weighted P/C fell to 0.10, which is about as low as it gets. If it persists, it will represent considerable short-term risk, but one day of such a reading is too easy to do with a program. The VIX is still falling and setting up another Sell signal. Levels are very low, but then again, "EVERYONE" knows that this is a good time to invest, and that next year is going to be positive. Go figure.
Investors Intelligence again reported 62.1% Bulls (the same as last week), and 21.1% Bears (also the same as last week). This is lingering at topping levels, though this condition can persist for some time. LowRisk reported 43% Bulls, down from 49% last week. Bears were at 17%, which was well down from 26% last week. This is fairly Bearish. I had figured that we would see a few fewer Bears before we marked a top. Is that it? It's too early to tell, but I doubt it. Last week, AAII reported 53% Bulls up from 51% last week and 19% Bears, down from 25% last week. This data is showing a modest increase in Bulls, but down from prior levels, and even fewer Bears. This isn't too Bearish, but it still shows considerable complacency and could support lower prices.
The Rydex Dynamic Bull fund assets increased by $33MM, while the Dynamic Bearish fund assets decreased by a $10MM. The shifts were actually modestly Bullish, except for another sizable Velocity to Venture shift. The RSO showed a Bearish shift on a nice rally. That's typically a Buy, and while I view it as positive, I'm not going to read too much into it, as the shift was entirely Velocity to Venture-related. Take all this data with a grain of salt this week.
The Senticator gave a Buy signal, and it is right, so far. This week can still bring a bit of Selling, but the bias is higher. The problem at this time of year is that typically good indicators don't work well. We'll probably get a surprise decline, and it's probably a Buy. Overall, however, the bias is higher. Trading ought to get pretty thin. Remember, our best sentiment tools are going to play second fiddle to trend. We're setting up for a top, but this situation can persist for some time. We just can't and shouldn't fight it--We could pick the top and be worn out before any serious decline begins. The real decline will begin from relatively benign sentiment levels.
The Mechanical model is long the SPY at 119.75 or better. Stop this at 117.50. Target 122.00. Our Subjective model is still short the SPY at 119.76. Cover this and reverse at 119.25. Stop this at 121.00.
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Not everyone likes a short-term trading model, and would like something that hangs onto bigger moves and reflects a less frenetic 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 this week. We just need a little pullback.
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Equity GuaridanGroup's ISA Navigator
For more on using the ISA and the various sentiment poll data, click here: ISA Sentiment
Mark Young
Editor
1-800-769-6980
