Check out www.traders-talk.comfor early updates of the sentiment polls every day.
Our T-4 Turn Indicator went out at 72 which is surprisingly away from a signal.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.
Options Sentiment
Daily P/C ratio: 1.27. Bullish.
10-day P/C ratio: 1.08. Neutral.
Equity P/C ratio: 0.84. Constructive.
OEX PC ratio: 1.42. Neutral.
OEX 10-day PC ratio: 1.21. Constructive.
OEX $-weighted* P/C ratio: 3.22. Buy.
QQQQ $-weighted* P/C ratio: 3.47. Buy.
ISEE Sentiment Index: 75. Buy.
Relative VIX: Neutral.
The options data are pretty Bullish. ISEE and the $-weighted P/C's are showing a ton ofpessimism, though the nominal P/C's aren't. Neither is the VIX. Market Harmonics' OptionsBuyers Sentiment Gauge is still down at levels that marked prior lows of importance andhas turned up. Overall, this is constructive, but we may have to see a bit more weaknessfirst.
OBSG chart
The ISEE Sentiment Index indicator is contrarian;traditionally, over 200 is too optimistic, under 100 is too pessimistic. *$-weighted P/Cdata 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 ofMarket Harmonics.
General Public Polls
TheStreet.com is showing 21% Bulls and 62% Bears on good participation. That's a hugeBearish shift. This is about as many Bears as going into the January low. Of course, wehad to see two more days of some ugly and wild trading to make the low.
TSPTalk's weekly poll shows 34% are Bullish and a whopping 53% are Bearish.That's Bullish.
Last week, AAII reported 34.31% Bulls and 45.26% Bears vs. 33.18% Bulls and 44.70%Bears. A rise in Bullishness and a rise in Bearishness. We're still in Buy territory andwe've been here for 16 of the last 17 weeks, which supports a rally of more significantduration. This implies that the low is in.
Investors Intelligence reported that Bulls rose to 42.0%, and Bears rose to 36.4%vs 41.6%, and 33.7%. That's a small Bullish shift and a solid Bearish shift. I hadexpected rising Bearishness on a pullback, not on a rally. We're not far outside Buyterritory.
LowRisk.com shows 34% Bullish vs. 46% last week and 41% Bearish vs. 36% last week.That's modestly Bullish.
Mark Hulbert's HSNSI stayed 4.2% and Nasdaq advisors remained at a Beared-up-42.9% (i.e. almost half short). That's a lot of Bearishness, but it's possible that withthe holiday, Mssr. Hulbert didn't update. Still, from here I suspect a rally to be lead bythe Nasdaq.
Lazlo Birinyi reported that bulls were at 33% and Bears were at 33% in his poll,which is perfectly neutral, though even splits often suggest a change in market character,at least in other polls.
Rydex Sentiment
Our Rydex data showed Bull funds had $4MM (net) outflows on a down day. Thenon-Dynamic Bear funds saw $1MM of (net) inflows. It looks like the amateurs were dumpinglongs and just nibbling at a few shorts. That's probably still Bearish. Dynamic Funds sawnet Bull fund sells of $33MM, and Bear fund net sells of $35MM. The Dynamic players appearto be confused and pulling in their horns. That may or may not be smart money, but I'mpretty sure that they don't FEEL smart (I know I don't). This data isn't as useful as itonce was. The often-right Russell Dynamic player(s) are adding longs and dumping shorts.That's better news. They were right the last time, though thus far they appear to beearly.
Conclusion
Friday, I said that trading was pivotal and if we were to recover, we would turn theweekly trend up, and if we couldn't, we could be headed for a test. We didn't and now atest is in play. Last week, I said that breadth could stand to see some sustainedimprovement, but technically that, and the other technicals were reasonably positive. Wemanaged to turn and confirm all of the intermediate-term stuff on Wednesday. That markedthe start of this sell off. Now THAT'S frustrating. This weekend, the data is interesting.The technical situation deteriorated significantly, but none are confirmed negatives, asyet. Meanwhile, we have an absolute ton of Bears in the larger public opinion polls, andthe speculators are heavily paying up for puts. Now, this deep sell-off in the face ofsome supportive sentiment and decent technicals is Bear market stuff, but the rules of thegame haven't changed that much. The excessive Bearishness is going to make it hard to keepthis market down if the selling pressure will come off just a bit. Basically, any littleexcuse could send this market up dramatically. Of course, there are no guarantees ofgetting that excuse before a re-test. We just have to watch the short-term trading. Earlyhints are Bullish, but it's too soon to tell.
Big picture, we still believe that we are in the range of some sort of low-- or that suchis behind us. It's quite possible that we have an important low in place, but now we haveto allow for a test or lower lows. Things are very fluid here. The pessimism is thick. Ipersonally can feel it. I actually have an aggressive desire to get short, in fact. Thatmeans that there's a lot of folks who are also short and looking to add. That's usually aprescription for a sharp rally. It's just that it can take some time. It's imperative thattraders have a plan in this environment and that we maintain our emotional composure. Whenwe should be buying most, we're going to be least inclined to. That means that those whoare sitting on cash and who want to own individual stocks should be accumulating namesthat they can live with on this weakness. As part of a discipline, some money should becommitted to the best looking issues every time we get broad selling. Similarly, in thisenvironment, leave yourself room to be wrong. The volatility, both higher and lower, cankill you or at least wear you out emotionally. Make sure you've got enough emotionalfortitude left to be doing the buying you should be when we turn.
Our call for the week is for weakness on Monday early, and then a reversal higher.Depending upon the sentiment on the turn I'd be looking for either a pullback on Thursdayinto Friday or if the rally starts later, for strength to hold the week.
The Mechanical Senticator will sit flat and so will the Subjective Senticator Model.Remember, these models must trade in the direction of the Senticator or not at all.
We do not have a ST Sentiment signal. The late volume tell was Bullish. Since we've beenpublishing our ST Sentiment Signals, we've had 80 trades and 55 winners. We're much moreactive now and I'm offering more set ups when I'm not going to be around. If you'd like atrial, feel free to contact us.
Ideal ETF Portfolio (tracking portfolio):
50% long DIA at 127.54.
50% long UWM at 50.61
I'm about fully long. I'm nervous. I may lighten up.
Past performance is no guarantee offuture returns. All information included in this missive is derived from sources webelieve to be reliable, but no guarantee can be made to that effect. None of the forgoingshould be construed as an offer or solicitation to buy or sell any security. The publishermay 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 tradethat you do with your trusted advisor FIRST.
If you'd like to receive the ISA Daily Trade Navigator as well as the ISA Weekend Report,you'll need to make sure to order at this link (please indicate your subscriber status inthe "notes"). http://www.wallstreetsentiment.com/order.html.
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Trade Well,
Mark Young
Editor
www.WallStreetSentiment.com
ABOUT SENTIMENT AND ANALYSIS
The Wall Street Sentiment Survey is taken each Friday from a generally static pool ofexperienced technical analysts (both private and professional). The Wall Street SentimentSurveyees are not normally a good fade, though there are times when they can be.
The Wall Street Sentiment Survey data are useful on the short term; they tend to be right.Typically they are right sooner rather than later, if there's a large plurality. On theflip side of the equation, if 90% or more are Bullish or Bearish, the odds of them beingright over the very short term are huge, but the odds of a major turn (in the oppositedirection) soon thereafter are also quite good.
We have also found that when the Wall Street Sentiment Surveyees are evenly split, lookfor a BIG move in either direction, but usually down.
Over the years, we have found a number of other tools to help in evaluating the WallStreet Sentiment Survey. We publish this in our weekly "Institutional Sentiment &Analysis" (a part of our institutional research). These additional tools are our"Smart Money" poll, Amateur Trader survey, and our Senticator. All areproprietary surveys conducted by us.
We have found that the Senticator tends to be right by the end of the week (as much as82.7% of the time), though it tends to be more accurate in a rising market than a fallingone.
The "Smart Money" pollees are very useful when there is divergent opinion. It'sgenerally NOT a good idea to fade the "Smart Money" unless"'EVERYONE'" (all sentiment measures) is in agreement. When in doubt about themeaning of the Wall Street Sentiment Survey, defer to the "Smart Money" poll orfade the "Amateur Survey". The "Smart Money" guys are folks with whomI've worked or whom I've watched for YEARS. They all have different approaches and they'reall VERY good (not infallible, just good analysts/traders).
The Amateur Surveyees are your classic more emotional traders who tend to be wrong whenthey are heavily leaning in any one direction--which is often at a turning point.
In addition to these surveys, we chronicle multiple other polls and surveys includingthose conducted by our sister firm, Traders-Talk.com. We also review options data and fundshifts at Rydex. Additionally, we are also the sole publishers of the T-4 indicatorcreated by Traders-talk--wish is a fantastic turn indicator.
Subscriptions to Institutional Sentiment and Analysis are $99 per year. This also includesspecial sentiment updates and reports. Our polls are unique and insightful, and ouranalysis is some of the most accurate on the Street.
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