ISA Daily Trade Navigator for Friday, 5/11/07
Published Friday at 9:00 AM EST
By Mark Young of Equity Guardian Group
www.EquityGuardian.com
Short-Term Sentiment: Bearish but mixed.
Overall Intermediate-Term Sentiment: Bullish-to-Neutral.
Individual Investor Sentiment: Bullish-to-Neutral.
Small Speculator Sentiment: Neutral-to-Bullish.
Small Hedge Fund/Manager Sentiment: Neutral-to-Bearish.
Longer-term Trend: Positive.
Intermediate-term Trend: Neutral.
Short-term (one-day) Signal: Sell. We'll nibble short on strength.
We are trading these signals intra-day with KTT subscribers on Yahoo IM--contact us fordetails.
Ideal ETF Portfolio (tracking portfolio):
100% Money Market.
We're flat. We are looking to re-enter long on a pullback.
Message Board Sentiment
The message board sentiment poll now shows Bulls at 28% and Bears at 50%, which wouldbe Bearish since these guys tend to be right, at least for a bit, but 50% Bears isBullish. Participation was well above normal. The Actual Position Poll has 28% fully longand 8% partially long. 19% are partially short and 31% are still fully short. This isagain well above my 20% fully short threshold and is Bullish for the market. Again, thetwo caveats are that this crew is uncanny about mostly getting right exactly at turns andwe're also seeing more aggressive Bulls. I'm thinking that we've got a lot of Bearishnesshowever, and that we'll bounce. After that, I'm not so sure. Longer-term, however, I'mfairly confident that we head higher because the Fully Long Bull/Fully Short Bear ratio isvery clearly on a Buy. Now, if we suddenly see "dip buying" in this data, thenwe're wrong and we will get much more Bearish. The T-4 will probably give us a heads up ata turn any import and right now it's very low.
For a larger chart, click the image above.
Our T-4 Turn Indicator went out last night at 53 which is still quite low for anasty decline day and well away from a signal. The last signal was a Sell on 3/8.Typically we want to see readings above 80 or higher before we look for worthwhile turns.This indicator doesn't catch every top and bottom, but it is a great "Heads up!"indicator. We'll provide a chart every time we get a high reading.
Options Sentiment
Daily P/C ratio: 1.11. Neutral to positive.
10-day P/C ratio: 0.92. Neutral.
Equity P/C ratio: 0.68. Neutral to positive.
OEX PC ratio: 1.01. Neutral to positive.
OEX 10-day PC ratio: 1.40. Neutral.
OEX $-weighted* P/C ratio: 0.22. Sell.
QQQQ $-weighted* P/C ratio: 0.96. Neutral.
ISEE Sentiment Index: 136. Neutral.
The options data are looking a bit Bullish, but the OEX $-weighted P/C was quite lowagain. Oddly so. I suspect a bounce is coming, but this data suggests that it may not bethe end of the decline.
The ISEE Sentiment Index indicator is contrarian;traditionally, over 200 is too optimistic, under 100 too pessimistic. I've loosened that abit in recent months. Readings over 2.0 are Bullish and near 0.5 are Bearish. *$-weightedP/C data courtesy of Fari Hamzei of www.hamzeianalytics.com .
General Public Polls
AAII reported 42.86% Bulls and 42.86% Bears vs. 28.57% Bulls and 54.29% Bears. This isa big shift, but unfortunately for the Bears, it remains in buy territory. Still it'sshowing a willingness to quickly get more Bullish among amateurs and that's what we'llneed to support a correction. Investors Intelligence, meanwhile reportedthat Bulls rose to 53.3% vs. 51.70%, and Bears fell sharply to 20.00% vs. 24.70%. Thisshift puts us well into Sell territory. LowRisk reported 30% Bullish vs. 32%Bullish last week, and 40% Bearish vs. 41% Bearish the previous week. This polling periodincluded that nasty Monday decline, but still this shows no acceptance of the rallythereafter. That makes it hard to look for a top of any import. Last week, TalkTSP, a large site devoted to Thrift Savings Plan management and personal financeshows 46% Bulls and 35% Bears, which isn't excessive, but it's heading in the rightdirection. The Street.com reports 55% Bulls and 22% Bears. This is the first"Joe Six-Pack" type reading that I've seen showing excessive Bullishness. Itbears some watching. Mark Hulbert reports that his HSNSI rose significantlyto 59.6% from 42.2%. That's still below the readings at the February high (62.4%), butit's now rising fast. It's not a Sell, but my research suggests that a Sell is just above.
Rydex Sentiment
Rydex didn't show us anything of importance yesterday, save a lack of excitement.Today, we see that non-Dynamic Bull funds had $2MM (net) of inflows on a nasty declineday. That's what I was afraid of. The non-Dynamic Bear funds saw $2MM of (net) outflows.It looks like amateurs are buying the dip, especially in the Naz. Nothing too dramatic,but you'd expect SOME selling on such a nasty fall. Dynamic Funds saw net Bull fund buysof $83MM, and Bear fund net sells of $56MM. It looks like the Dynamic players wereshifting out of OTC shorts and into OTC longs in size, and out of S&P longs and intoshorts in smaller lots. The RSO showed a $72MM Bullish asset shift on a nasty down day.That's a Buy, and while it was mostly large OTC shifts, there were no signs of amateurselling and some signs that the amateurs were actually BUYING the dip. Basically, we'rethinking that the decline has more to go.
Conclusion
Last time I said that I was looking for the market to open down and probably extendand I advised that the Fearless Forecasters polls should not be read as hugely Bullish,because those folks tend get right at turns and the Options data also supported someselling. I was looking for the market to fall and then find support fairly quickly. Thismorning, it looks like it has. The question is, now what? I'm seeing two importantconflicting indications. The first is that the Fearless Forecasters are still prettydarned Beared up and the FLB/FSB ratio is on a buy. This crew isn't buying the dip. TheRydex Amateurs, however, are. The options data support some rally, but the technicals werepretty bleak yesterday. My thinking is that we rally today, but I'm not at all sure itholds. I'm pretty confident that we have another shot down. THAT weakness can probably bebought. My guess is that the better time to look for weakness is next month. Be alert fora flip-flop if we see more dip-buying. This is a tricky market. Just remember that anintermediate-term sell has to be proven.
We do have a ST Sell Sentiment signal. We're looking short on strength. Since we've beenpublishing our ST Sentiment Signals, we've had 41 trades and 29 winners.
The Mechanical Senticator model went short the SPY at 150.88 and the Subjective SenticatorModel took a half position at 151.20. Let's close these up at the open and notworry. Remember, these models must trade in the direction of the Senticator or not at all.
Ideal ETF Portfolio (tracking portfolio):
100% Money Market.
We're flat. We are looking to re-enter long on a pullback.
Past performance is no guarantee of future returns. Allinformation 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 asan offer or solicitation to buy or sell any security. The publisher may have a long orshort position in the funds or securities discussed at any given time. We aren't youradvisor, unless you have a signed contract with us. Please review any trade that you dowith your trusted advisor FIRST.
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For more on using the ISA and the various sentiment poll data, click here:
Mark Young
Editor
800-769-6980
859-393-3335
