NAAIM Sentiment Study Update, (Updated 11-28-11) Options

[OEXCHAOS]

NAAIM Median Exposure Levels: A Useful Indicator

Every week, the National Association of Active Investment Managers surveys its members to determine their market exposure levels. The managers are active and some are quite aggressive. They have the technical capacity to be as much as 200% Long or Short the market.

We have found that this data, particularly Median exposure levels appear to have some meaningful contrarian predictive value. We have also found, gratifyingly, that during well defined Bullish and Bearish market cycles, survey respondents appear to properly position for extended periods. There are limits to confidence levels with a relatively small data set, but thus far, the predictive patterns appear robust.

We looked at 4 different types of contrarian "signals" from this data. They are as follows:

Intermediate-term Buys when Median Exposure is less than/equal to 20%
Intermediate-term Sells when Median Exposure is greater than/equal to 80%

Very Short-term Buys when Median Exposure shifts down 20% or more
Very Short-term Sells when Median Exposure shifts up 20% or more

We defined "Intermediate-term" as more than 5 market days and/or more than 5%
We defined "Very Short Term" as a move beginning within 1 or 2 days of the signal and generating at least 1.2%.

Intermediate-term Buy or Sell signals are considered to be "in effect" until a reset, that is until median exposure levels move back above or below the trigger levels of 80% and 20%.

2006-2007


2007-2008


2008-2009


Thru 3-18-10



Thru 4-04-11





Through 12-01-11




Current through 11-09-12




Out of 7 Intermediate-term Sell Signals, 4 were followed by declines within 3 days. 1 signal was followed by a decline within 5 days. 2 of the Sell signals only generated very modest pullbacks. The failed Sells were during pronounced Bullish periods. 5/7 of the Sell signals can be viewed as "accurate/profitable".

Out of 9 Intermediate-term Buy Signals, 7 were followed by rallies within 5 days or less. 2 signals were failures. Both were during the prolonged Bear market of 2008-2009. 7/9 of the Buy signals can be viewed as "accurate/profitable".

Out of 11 VST Sells 10 generated immediate or near immediate short-term sell offs. 1 sell off took 3 days and was considered the lone failed signals. 6/7 of the VST Sells were "accurate/profitable".

Out of 14 VST Buys, 12 generated appreciable rallies within 1-2 days. 2 signals failed to generate any tradable rally.

Of note, we find that this study does not imply some inherent failure of active investment management. In fact, exposure levels often indicated managers were well positioned during extended market moves. Since managers are not typically very short-term traders, one cannot conclude anything about active investment management from very short-term adverse moves, other than such are part and parcel of investing in equity markets.

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[steve7074]

Mark

I see the historic charts, but nothing for right now.

What does this tell us ?

[OEXCHAOS]

Mark

I see the historic charts, but nothing for right now.

What does this tell us ?

It looks like a Buy and it looks like it's confirmed. We've updated the last chart.

[IYB]

Very Short-term Buys when Median Exposure shifts down 20% or more

Intermediate-term Buy or Sell signals are considered to be "in effect" until a reset, that is until median exposure levels move back above or below the trigger levels of 80% and 20%.

I take it the current signal is a VST Buy. Yes? How long or until what condition occurs does this VST Buy stay in effect? TIA, D

This post has been edited by IYB: Nov 28 2011, 03:56 PM

[OEXCHAOS]

A couple days, no more than 4.

BUT, it can last longer, take a look at the past readings. All the charts are there.

I should probably upload hard data for your guys study.

Mark

[dTraderB]

also look at the UP - Down volume last week.

On a few hourly bars it was higher than 50 to 1

[OEXCHAOS]

Charts are again updated. Time to take another look, folks.

Mark

[Rogerdodger]

2 years: 2011-2012: