Wall Street Sentiment, By Mark Young Options

[TTHQ Staff]

Wall St. Sentiment Weekly 10/09/11
Institutional Sentiment & Analysis
Published Sunday 10/09/2011
By Mark Steward Young

Short-Term Sentiment: Mixed.

Overall Intermediate-Term Sentiment: Mixed to Bullish for the market.

Individual Investor Sentiment: Bullish for the market.

Small Speculator Sentiment: Mixed for the market.

Small Hedge Fund/Manager Sentiment: Bullish for the Market.

Longer-term Trend:
Bear Market Condition.

Intermediate-term Trend:
Negative. Turning.

Short-term (one-day) Signal:
Buy. We're looking both ways.

We are trading these signals and others intra-day for our Premium subscribers--contact us for details ( http://www.wallstreetsentiment.com/contact.html).

********************************************************
We are on an Options Oscillator Buy. Options are surprisingly mixed. There are a lot of Bears in the weekly poll. NAAIM Bears are shorting heavily. The low MAY be in.
********************************************************

Results of the Wall Street Sentiment Survey (formerly known as the Fearless Forecaster Sentiment) taken after the close on 10/07/11:

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

Weekly BULLS: 19%
Weekly BEARS: 67%

Our `Smart Money' Pollees were 25% Bullish and 50% Bearish.

Our Amateur Trader Pollees were 0% Bullish and 75% Bearish.

The Senticator: Neutral.

Last time, our low confidence call for a decline on Monday a bounce that fails Tuesday, and maybe Wednesday, and then down through Friday. The S&P was down on Monday and up Tuesday Wednesday and Thursday, then down Friday. That actually wasn't too bad. I think we can take a B for that call. Remember, these predictions are for demonstration purposes and are not a substitute for trading discipline.

The New Sentiment Trading Modest sat flat due to the ambiguous signal. Not a bad call. Note that this model is for demonstration purposes only. Past performance should not be considered a guarantee of future returns.

Proprietary Surveys
This week, the WSS Surveyees are again rather Bearish. The "Smart Money" is pretty Bearish and the "Amateur" traders are more Bearish. That implies more strength, though I think we might get a little selling this week. The Senticator is Neutral. We had decent participation. I think we're net up on this data for the week.

Message Board Sentiment
The message board sentiment poll has Bulls at 26% and Bears at 30% This is Bearish, since this crew tends to be right more often than not. Participation was normal. The Actual Position Poll shows 19% fully long and 7% partially long. 4% are partially short and 33% are fully short. This is well above my 20% threshold and that is mildly Bullish. The lack of partially short Bears and partially long Bulls suggests that we could get some volatility. The 5-day Fully Long/Fully Short (FL/FS) ratio is still Bullish at 76%. This crew was not leaning heavily long at the low. This crew ALWAYS gets long and leans hard in the right direction at important turns. This makes me at least question the importance of the low we just made. The weekly Fearless Forecaster poll shows 73% Bears. That implies some more rally this week.

You can check out Traders-Talk.com for early updates of the sentiment polls every day and overnight here: http://www.traders-talk.com/mb2/index.php?showforum=2.

Our T-4 Turn Indicator is at 35 which is away from a signal. Typically we want to see readings above 60 or higher. This indicator doesn't catch every top and bottom, but it is a great "Heads up!" indicator.

Options Sentiment
Daily P/C ratio: 1.16. Weak Buy.
10-day P/C ratio: 1.21. Buy.
Equity P/C ratio: 0.69. Neutral.
OEX PC ratio (not a fade): 2.16. Sell.
OEX 10-day PC ratio: 1.24. Neutral.
OEX $-weighted* P/C ratio: 2.02. Buy.
NDX $-weighted* P/C ratio: 1.94. Neutral. Near a Buy.
ISEE Sentiment Index: 66. Buy. ST Buy
10-Day ISEE Sentiment Index: 97. Buy.
Options Oscillator: -20. Buy on the heels of a Strong Buy.
Relative VIX: Positive.
Daily VIX: Sell.

The short-term options look very mixed for the market. We've got quality Buys and Sells. The Options Oscillator is still on a ST Buy and it's flashing a repeat Buy. The nominal OEX is flashing a good sell while hte $-weighted is flashing a Buy. We will probably get some volatility. Market Harmonics' Options Buyers Sentiment Gauge (thank you, Tony Carrion http://www.market-harmonics.com) is Neutral, back on a Buy.

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

National Association of Active Investment Managers (NAAIM) Sentiment Survey reported that the Median market exposure remained at 0%. That's that's a sign that we're at least NEAR a low and it may also already be in. That's unfortunately not a good enough indicator to just start buying, however, in a Bear Market. The IT Buy is still in force, but we need a confirmed trend change. The mean exposure went from 4.18% to -3.56%, which is not a big drop but they did go net short on average. That's Bullish. The maximum short exposure shot up to 200% short from 125% short, but the maximum long exposure also shot up from 90% long to 130% long. That's interesting. The most aggressive Bulls got more Bullish, and the most aggressive Bears got maximally Bearish. I was looking for more aggressive shorting and we got it. The odds of the low being in are rising.

TSPTalk reported 44% Bulls and 44% Bears, vs. 35% Bulls and 53% Bears the prior week. That's more Bulls and less Bears. That's a Sell by their new measures but I think it's more Neutral given the strength. They are now using their Bear Market Filter. We agree.

AAII is showing 35.24% Bulls and 45.71% Bears. Last week, we had 32.51% Bulls and 46.80% Bears. This is a few more Bulls and a few less Bears. This is still Bullish. We might have expected more but the rally came late.

Investors Intelligence reported 34.40% Bulls and 45.20% Bears vs. 37.60% Bulls and 40.90% Bears last week. That's the less Bulls and more Bears. That's still in Buy zone and that's probably Bullish.

The Newsletter Advisors got a bit more Bearish at -16.80% (short) vs. -14.70% (short). It's more Bearishness but not much though short is short. The Naz advisors got Bearish at -18.80% (short) vs. 1.60% (long) last week. That is rather supportive of higher prices.

Lazlo Birinyi's site, Tickersense, reported 14.80% Bulls and 51.85% Bears vs. 20.69% Bulls and 58.62% Bears the prior week. That's less Bulls and less Bears. That's still Bullish for the market with so many Bears and so few Bulls. Caveat: this measure has been our least predictive over the past year or so.

Conclusion
Last week, I said that with the hedging in the ETF's actually accelerated and that the relative VIX was getting up there again even as NAAIM medial exposure dropped to levels last seen at the '09 lows. I was pretty sure that we were headed lower, but that we had a lot of good sentiment numbers falling into place. I was just looking for the set up to start picking a bottom. We fell hard on Monday and reversed. The Relative VIX shot above 2.05, for a buy and that may have been enough for a low. As we rallied on Tuesday through Thursday, we saw rising shorting in the SH and plenty of put buying. It is possible that we won't get all the good bottom spotters to set up a buyable low. In fact, we must allow that the low may be in. It happens that way, sometimes. We are now in the positive part of the seasonal cycle and it won't take much at all to trigger a Buy. With the accumulated shorts in the SH Right now, and with rates very low. There's fuel. There's also no place to put cash in order to beat inflation. No place, that is, except STOCKS. So, IF the perceived risk in equities drops even a bit, we could get a short-squeeze rally like we haven't seen in a long, time. We will be looking for any chance to start accumulating stocks. My call for the week is for a decline on Monday a rally Tuesday, a pullback Wednesday, and then up through Friday. I'm also open to any manner of choppy action on Monday and Tuesday and a rally through Friday.

We have switched to a more robust sentiment approach with a momentum and trend overlay. Momentum is Positive but the Sentiment for this model is iffy. Still, other sentiment is Bullish. So, despite the Bear Market, we can nibble long a little bit at 114.15 or better. 1/2 position. Stop 2 points below entry. Exit 2 points above.

We are looking both ways. We managed to take 13 points Friday. Since we've been publishing our ST Sentiment Signals, we've had 310 trades and 193 winners. If you'd like a trial, feel free to contact us (mark@wallstreetsentiment.com).

****************
Ideal ETF Portfolio (tracking portfolio):

0% QLD 34.30
100% Money Market.

Sold the QLD at 97.75. We are flat.

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

The above "Ideal ETF Portfolio" Model does not represent an actual managed account nor a managed account program that we offer. This is only for tracking purposes for the KTT and Premium newsletters. 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.

---------------------------------------------------------------------------------

If you'd like to receive the Wall Street Sentiment Daily, you'll need to make sure to order at this link (please indicate your subscriber status in the "notes").

http://www.wallstreetsentiment.com/order.html

If you are a KTT or Institutional subscriber, your Wall St. Sentiment Daily and Premium upgrade subscription is included.

For more on using Wall Street Sentiment and the various sentiment poll data, click here:

http://www.wallstreetsentiment.com/d/i.html

Mark Young
Editor

859-393-3335