Institutional Sentiment and Analysis
Tuesday 11/18/2009 at 9:20 am
By Mark Steward Young
Short-Term Sentiment: Negative for the market.
Overall Intermediate-Term Sentiment: Mildly Bearish for the market.
Individual Investor Sentiment: Mixed for the market.
Small Speculator Sentiment: Bearish for the market.
Small Hedge Fund/Manager Sentiment: Bearish for the Market.
Longer-term Trend:
Bull Market Condition.
Intermediate-term Trend:
Positive.
Short-term (one-day) Signal:
Sell.
We are trading these signals and others intra-day for our Premium subscribers--contact us for details ( http://www.wallstree...om/contact.html).
Ideal ETF Portfolio (tracking portfolio):
25% QLD at 34.30
50% QID at 33.21
25% QLD at 26.09
We've adjusted the hedge (re-balanced) as of 10/22/09. We may take off part of the hedge.
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CONTINUED MAJOR CAUTION ALERT: We have multiple reliable indicators suggesting some variety of top today or within the next day or so. Caution is strongly indicated. We have a FL/FS Sell and the OEX P/C is Bearish.
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Message Board Sentiment
The message board sentiment poll shows Bulls at 43% and Bears at 37%. This is Bullish since these guys tend to be right. The Actual Position Poll shows 26% fully long and 9% partially long. 11% are partially short and 29% are fully short. This is well above my 20% threshold which is good news for the market, but it's important to remember how often this crew gets positioned perfectly at turns. It's uncanny. The FL/FS 1-day is on a Sell, and we can look short at any time now. Chances are, with OpEx, they'll hold it together this week, but maybe not. The technicals support a speculative short. The 5-day Fully Long/Fully Short ratio is neutral. We can look lower, with care.
http://www.traders-t...st&id=14022.png
Check out www.traders-talk.com for early updates of the sentiment polls every day and overnight.
Our T-4 Turn Indicator went out at 37, which is away from a signal. Typically we want to see readings above 80 or higher before we look for worthwhile turns. This may be dropped to 70 as we've taken some actions recently that improve the signal to noise ratio, but have lowered the number of new topics. This indicator doesn't catch every top and bottom, but it is a great "Heads up!" indicator.
Options Sentiment
Daily P/C ratio: 0.88. Neutral
10-day P/C ratio: 0.89. Neutral.
Equity P/C ratio: 0.65 Neutral. The 10-Day is Bearish.
OEX PC ratio (not a fade): 1.97. Sell.
OEX 10-day PC ratio: 1.46. Negative.
OEX $-weighted* P/C ratio: 0.30. Sell.
NDX $-weighted* P/C ratio: 0.79. Neutral.
QID (Ultra Short QQQQ) P/C ratio: 0.11. Buy.
SDS (Ultra Short SPX) P/C ratio: 0.21. Buy.
ISEE Sentiment Index: 130. Neutral.
10-Day ISEE Sentiment Index: 135. Warning of Correction. (H/T to persistent subscriber)
Relative VIX: Neutral.
Daily VIX: Sell.
The options data are Bearish in a couple key places again. The $-weighted OEX and all the Equity P/Cs are still Bearish. The 10-day is especially bothersome. ISEE is also still flashing a Warning Signal, which is usually good for a week of selling too. Market Harmonics' Options Buyers Sentiment Gauge (thank you, Tony Carrion http://www.market-harmonics.com) is just coming off a clear Sell. Most options indicators are contrary; if folks are buying calls, we want to fade them and go short. The OEX nominal P/C is an exception, because the OEX traders tend to be right, unless they are paying up for options (which will show up in the $-weighted data).
(If the chart is corrupted, use this link: http://www.market-ha...nt/obsglong.gif )
The ISEE Sentiment Index indicator is contrarian; traditionally, over 200 is too optimistic, under 100 is too pessimistic. *$-weighted P/C data courtesy of Fari Hamzei of www.hamzeianalytics.com . Readings over 2.0 are Bullish and near 0.5 are Bearish. OBSG provided by Tony Carrion of Market Harmonics.
General Public Polls
Mark Hulbert's HSNSI rose to net long 34.40%. The Nasdaq advisors leapt to 42.8% Long. This is a huge Bullish shift, very fast. I don't recollect a shift this big this fast. I have to think that this is a sign of a Bull trap. It's Bearish, near term.
Lazlo Birinyi's site, Tickersense, reported 56% Bulls and 25% Bears. That's Bullish, but the poll was given over the weekend so yesterday's huge rally probably had an ameliorating affect. Still, that they were that Bearish indicates an overall tendency that will tend to act like a put under the market.
The RealMoney Poll showed 49% Bulls and 35% Bears. That could bring some selling but it's not too far over the top. Last week, it was showing 35% Bulls and 52% Bears.
Last week, TSPTalk reported 49% Bulls and 39% Bears vs. 54% Bulls and 34% Bears last week. That's still technically a Buy by their new measures, but I'd call that neutral. They are now using their Bull Market Filter.
AAII reported 38.62% Bulls and 38.62% Bears vs. 22.22% Bulls and 55.56% Bears last week. That's a big jump in Bullishness and a big drop in Bearishness. That's just barely a Buy. I view this is too much too fast, and probably a sign of a pending pullback.
Investors Intelligence reported 44.4% Bulls and 26.70% Bears which is out of Sell Territory. Fewer Bulls than last week and a couple more Bears. This is an improvement but not a signal. Last week they had 48.30% Bulls and 24.70% Bears.
Conclusion
Last time, I said that the market break out had all the ear marks of a Bull trap, plus, we there is a tendency for some selling going into Thanksgiving anyway. Worse for the market, ISEE was flashing a reliable weekly Sell and we also had a FL/FS Sell. I advised top pickers to pick their spot to short. That's about where I am now, save that the OEX is saying "Look South" too. With options expiration, it's hard to look for a creaming, but the market could be down just enough to make it uncomfortable to short prior to a real decline next week. I favor lower prices, perhaps starting today, but I'm under no illusion that it will be all one way. The probability of chop this week is quite high. I think that we would be ill-served by any greed on the short side. Big picture, I'll not get very Bearish until other sectors stop showing a real willingness to turn Bearish at any sign of weakness.
We are on twitter and we offer comments and trade updates throughout the day as we have time or as we see sentiment of interest. You can follow us at http://twitter.com/WallStSentiment .
The Mechanical Senticator and Subjective Models will sit flat. Remember, these models must trade in the direction of the Senticator or not at all. In case you haven't been keeping track, we just figured that the Senticator has outperformed the market by 58% over the past 3 3/4 years and is up nicely (15%) this year--that's with no leverage and few shorts.
We are looking lower as we have a Sell. Shorting strength makes sense. Since we've been publishing our ST Sentiment Signals, we've had 135 trades and 90 winners. If you'd like a trial, feel free to contact us ( http://www.wallstree...om/contact.html).
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Ideal ETF Portfolio (tracking portfolio):
25% QLD at 34.30
50% QID at 33.21
25% QLD at 26.09
We have adjusted the hedge as of 10/22. We may take off part of the hedge.
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Past performance is no guarantee of future returns. All information included in this missive is derived from sources we believe to be reliable, but no guarantee can be made to that effect. None of the forgoing should be construed as an offer or solicitation to buy or sell any security. The publisher may have a long or short position in the funds or securities discussed at any given time. We aren't your advisor, unless you have a signed contract with us. Please review any trade that you do with your trusted advisor FIRST.
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For more on using Wall Street Sentiment and the various sentiment data included, click here:
http://www.WallStree...<br /> <br /> Mark Young
Editor
859-393-3335
818-MARKETS
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