) Enjoy!ISA Daily Trade Navigator for 1/10/08
Thursday 1/10/2007 at 8:59 am
By Mark Young of Equity Guardian Group
Short-Term Sentiment: Bullish.
Overall Intermediate-Term Sentiment: Bullish.
Individual Investor Sentiment: Bullish.
Small Speculator Sentiment: Bullish.
Small Hedge Fund/Manager Sentiment: Mixed.
Longer-term Trend:
Bear. Unconfirmed.
Intermediate-term Trend:
Negative. Trying to turn.
Short-term (one-day) Signal:
Buy. We look Long after a pullback.
We are trading these signals and others intra-day for our Premium subscribers--contact us for details.
Ideal ETF Portfolio (tracking portfolio):
50% long DIA at 127.54.
50% Money Market
We are long for the purposes of Timer Digest. We may add today for a risky play.
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Introduction
The futures are flat, and the late volume "tell" was Bearish. The volume on the day, however, was Bullish, I think. The options sentiment is still quite supportive and the AAII players are looking for Armageddon. Rydex shows the amateurs selling the rally and shorting.
Message Board Sentiment
The message board sentiment poll shows Bulls at 58% and Bears at 16%, which would be Bullish since these guys tend to be a bit right more often than not, at least short term, but over 50% is usually a fade. Participation was average. The Actual Position Poll has 21% fully long and 37% partially long. 5% are partially short and 16% are fully short. This is well below my 20% threshold but at turns that's not uncommon. Basically, there's not too much confidence in the rally's quality, but there's a lot of faith in more near term strength. This implies that the low is probably good, but that it may need to be tested. I am particularly worried about all those weak-handed Bulls (again) as they often get shaken loose. The Fully Long Bull/Fully Short Bear ratio is still below 100, which is constructive, but in a weak market this can go much lower.
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Check out a href="."/" eudora="autourl">www.traders-talk.com for early updates of the sentiment polls every day.
Our T-4 Turn Indicator went out at 80 which is a signal. I'm saying it's a Buy. We had a signal on Friday and it was clearly a Sell. 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: 1.16. Constructive.
10-day P/C ratio: 1.08. Neutral.
Equity P/C ratio: 0.75. Constructive.
OEX PC ratio: 1.20. Constructive.
OEX 10-day PC ratio: 1.12. Buy.
OEX $-weighted* P/C ratio: 1.81. Nearly still a Buy.
QQQQ $-weighted* P/C ratio: 1.81. Nearly still a Buy.
ISEE Sentiment Index: 72. Strong Buy.
Relative VIX: Neutral.
The options data are rather constructive, and the ISEE is screaming "Buy!" as is the 10-day OEX P/C. Many of the $-weighted P/C's are up in Buy territory still. This is Bullish after such a nice reversal.
The ISEE Sentiment Index indicator is contrarian; traditionally, over 200 is too optimistic, under 100 is too pessimistic. *$-weighted P/C data courtesy of Fari Hamzei of www.hamzeianalytics.com . Readings over 2.0 are Bullish and near 0.5 are Bearish.
General Public Polls
AAII reported 19.63% Bulls and 58.88% Bears vs. 25.71% Bulls and 55.24% Bears. This is another solid decrease in Bulls and increase in Bears, and we are way into buy territory. At this time of year, this is quite constructive. This reading, if supported by breadth sets up the market for a big rally. We're almost there.
Investors Intelligence reported that Bulls fell to 48.4%, and Bears rose to 25.8% vs 52.2%, and 24.5%. That's again a bit less Bulled up again, but still it's just out of sell territory. We would really like to have seen much more Bearishness here. This reading is at best Neutral. We'd view it as Bearish were Hulbert's numbers in agreement.
Mark Hulbert's HSNSI fell to -4.5% from 28.4% last week, which is a big shift and one that turns us Bullish. Over the past 5 years the day after a shift to net short has marked a low more often than not and 82% of the time the market has not fallen more than 2% further.
Lazlo Birinyi reports that bulls were at 45.45% and Bears were at 40.91% in his poll, which is still a lot of Bulls but many more Bears than before. This data is not a Buy, but it's starting to get more supportive.
Last week, TheStreet.com now reported Bulls at 23% and Bears at 55%. This is still a Buy, though it has been showing less Bearishness as time has gone on. The latest improvement is not surprising given the lack of weakness overnight.
TSPTalk, a larger polling site devoted to savings plan management has their poll showing 35% Bulls and 53% Bears. That's again a Buy, and a better one by my reckoning. I view this reading as much more constructive, if not an outright Buy.
LowRisk.com reported 41% Bullish vs. 36% last week, and 31% Bearish vs. 36% last week. That's a fairly neutral reading again and rather late. This poll closed last Sunday. Not much help.
Rydex Sentiment
Today, our Rydex data shows Bull funds had $6MM (net) outflows on a nice rally. The non-Dynamic Bear funds saw $2MM of (net) inflows. It looks like the amateurs are selling Bull funds and going short. That's a Bullish sign--the amateurs don't believe the rally. Dynamic Funds saw net Bull fund sells of $111MM, and Bear fund net buys of $56MM. The Dynamic players appear to be going short and dumping longs. The shorting was mostly in the S&P. I don't think that the big smart traders in the OTC funds are playing right now, though I could be wrong. These shifts have to be viewed as neutral or a bit Bearish, but amateur shifts are probably more important. The often-right Russell Dynamic player(s) were slipping out of longs too, but not in size.
Conclusion
Last time, I said that a low was at hand due to the rather reliable MACD Sell (87% chance of rally), the net shorting in Hulbert's survey (about 80% probable rally), and the OEX 10-day. I was looking lower early, and then for a bottom. We got both. The volume looked good and there's a ton of skepticism. That implies that it's a good low...of some sort. The one concern I have is the large number of partially long Bulls. They may have to be shaken loose and Uncle Ben could do it. He just doesn't inspire confidence the way Alan did. The technicals have really improved but they haven't flashed a confirmed buy, as yet. Still, some very reliable tools support a low in here somewhere. I'd be constructive here, especially if they give us a scary decline, just don't over-expose.
The Mechanical Senticator went long at 146.53. The Subjective Senticator Model bought a half position there as well and doubled up at 144.91. Remember, these models must trade in the direction of the Senticator or not at all.
We do have a ST Sentiment Buy signal. The late volume was Bearish, so I'll be looking to buy weakness, if I see patterns working again. Yesterday, we had one more short trade and were stopped out on a half position, again which sent us to the sidelines, though we did advise of the set up for a test of the lows. Since we've been publishing our ST Sentiment Signals, we've had 77 trades and 54 winners. We're much more active now and I'm offering more set ups when I'm not going to be around. If you'd like a trial, feel free to contact us.
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Ideal ETF Portfolio (tracking portfolio):
50% long DIA at 127.54.
50% Money Market
We're long, and may add today.
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Past performance is no guarantee of future returns. All information included in this report 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.
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For more on using the ISA and the various sentiment poll data, click here:
http://www.WallStree...m<br /> <br /> Mark Young
Editor
