Institutional Sentiment and Analysis
Tuesday 11/23/2010 at 8:45 am
By Mark Steward Young
Short-Term Sentiment: Mixed.
Overall Intermediate-Term Sentiment: 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:
Sell.
Short-term (one-day) Signal:
Buy. Looking both ways.
We are trading these signals and others intra-day for our Premium subscribers--contact us for details ( http://www.wallstree...om/contact.html).
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IIdeal ETF Portfolio (tracking portfolio):
25% QLD 34.30
25% QID 13.18
50% Money Market.
Bought an amount of QID equal to the value of the QLD. This effectively takes us flat.
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The repeat FL/FS 1-day Buy is still in force. Lots of Bears in the message board poll. Newsletter writers are still pretty Bullish. The options say, look out below.
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Message Board Sentiment
The message board sentiment poll now shows Bulls at 19% and Bears at 62%. This would be Bearish since this crew tends to be right, at least for a bit, but we're well north of 50% Bearish and that's a Buy of some sort. Participation was normal. The Actual Position Poll shows 14% fully long and 24% partially long. 24% are partially short and 24% are fully short. This is above my 20% threshold and that is somewhat Bullish. There are a lot of partially long Bulls but a lot of partially short Bears. We can go both ways on this data. The FL/FS 1-day Buy is still in force, but getting old. Maybe we make a low today. The 5-day Fully Long/Fully Short (FL/FS) ratio is on a Buy and nearly a Strong Buy. We can bounce today, but it's iffy.
You can check out Traders-Talk.com for early updates of the sentiment polls every day and overnight here: http://www.traders-t...php?showforum=2.
Our T-4 Turn Indicator is at 34 which is well away from a signal but good activity for a Monday. Typically we want to see readings above 70 or higher (now that we've made changes to the posting guidelines). This indicator doesn't catch every top and bottom, but it is a great "Heads up!" indicator.
Options Sentiment
Daily P/C ratio: 0.79. Sell.
10-day P/C ratio: 0.83. Sell.
Equity P/C ratio: 0.57. Neutral.
OEX PC ratio (not a fade): 3.15. Neutral.
OEX 10-day PC ratio: 1.30. Neutral.
OEX $-weighted* P/C ratio: 1.22. Neutral.
NDX $-weighted* P/C ratio: 0.01. Neutral.
QID (Ultra Short QQQQ) P/C ratio: N/A.
SDS (Ultra Short SPX) P/C ratio: N/A.
ISEE Sentiment Index: 107 vs. 126. Neutral.
10-Day ISEE Sentiment Index: 122. This is Neutral. (H/T to a persistent subscriber)
Relative VIX: Neutral.
Daily VIX: Sell.
The P/C data are very interesting. The OEX P/C took a big jump and the 10-day has moved to Sell territory. The "smart money" guys also appeared to be buying and paying up for puts on the SPX even as the speculators seemed to be paying up for NDX calls. It's as if the amateurs were leaning long even as the pros were positioning short for this decline. Almost. This data is Bearish, obviously. Options expiration makes this data iffy, but sells are sells, so some care is warranted. Market Harmonics' Options Buyers Sentiment Gauge (thank you, Tony Carrion http://www.market-harmonics.com) is flashing a Sell. These signals can be early.
(If the chart is corrupted, use this link: http://www.market-ha...nt/obsglong.gif )
Most options indicators are contrary; if most folks are buying calls, we want to fade them and go short and vice versa. 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 $-weighted data). The ISEE Sentiment Index indicator is contrarian; traditionally, over 200 is too optimistic, under 100 is too pessimistic. *$-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
Lazlo Birinyi's site, Tickersense, reported 50% Bulls and 21.00% Bears vs. 50% Bulls and 14.29% Bears the prior week. That's a lot of Bulls still, and not many Bears and that's pretty Bearish for the market. Note: I voted Bearish in the poll.
The Newsletter Advisors got less Bullish at 46.1% net long vs. 60.0% net long last week. That's still a Sell. Naz advisors got a little bit less Bullish at 60.0% net long vs. 73.3% net long last week. The data is Bearish for the market.
National Association of Active Investment Managers (NAAIM) Sentiment Survey reported that the Median market exposure fell to 80.00% vs 97.00% last week. That's a big drop but not enough for a ST Buy and we are still in IT "Prepare to Sell" territory with a change in trend. The mean exposure went from 71.46% to 66.59%. The Median exposure with the trend change is a sell, though the shift might allow for a bit more bounce--though yesterday may have fulfilled. The maximum short exposure fell to -125% and the maximum long exposure stayed at 200%. Big picture, this data is consistent with a correction.
TSPTalk reported 55% Bulls and 34% Bears, vs. 55% Bulls and 35% Bears last week. That's still a Sell by their new measures, and that's a Sell by mine. They are using their Bull Market Filter and we are in agreement.
AAII is showing 40.00% Bulls and 32.50% Bears. Last week, we had 57.56% Bulls and 28.49%. This is a lot less Bulls and a few more Bears. That's back away from a Sell (no surprise). Once we have the minimum sentiment set up for an intermediate-term sell (as we have from two weeks ago), we can't look at drops in Bullishness as particularly Bullish until we get a Buy.
Investors Intelligence reported 56.2% Bulls and 20.2% Bears vs. 48.4% Bulls and 23.1% Bears last week. That's a lot more Bulls, and even fewer Bears. We were already in Sell territory. This is worse. This is dip buying. Bearish for the market.
Conclusion
Last time, I said that while the FL/FS was Bullish and allowed for a push higher for a bit, the polls and surveys had a lot of Bulls and I was not seeing a completed corrective pattern. Given that they like to trade the market down for Thanksgiving, I was looking lower, despite some indicators looking more Bullish. We got some weakness but came back, but this morning we're down hard in GLOBEX. The FL/FS Buy may mark a low today and a bounce, but the real story is the options. The "Smart Money" traders in the OEX and SPX were really Buying puts, while the NDX speculators had the $-weighted P/C about as low as it can go. If I didn't know better, I'd think that somebody big was tipped off that N. Korea was going to start lobbing shells. In any case, we've had plenty of warning of lower prices and the trend is still down. I'm OK with looking for a bounce, but the serious money needs to remain safe. We have nothing that suggests that this decline is over.
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 .
We have switched to a more robust sentiment approach with a momentum and trend overlay. The new Sentiment Model will short a 1/2 position in the SPY on a rally to 121.15 or better (if not filled by Tuesday, cancel). Weekly traders will use 119.85 as their target.
We are looking both ways with care. Yesterday we took a nice profit on the long side. Since we've been publishing our ST Sentiment Signals, we've had 190 trades and 127 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 34.30
25% QID 13.18
50% Money Market.
Bought an amount of QID equal to the value of the QLD. This effectively takes us flat.
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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.
