Wall St. Sentiment Weekly 3/06/11
Institutional Sentiment & Analysis
Published Sunday 3/06/2011
By Mark Steward Young
Order today by calling 859-393-3335 or order on-line at wallstreetsentiment.com
Short-Term Sentiment: Bearish.
Overall Intermediate-Term Sentiment: Mixed-to-Bearish for the market.
Individual Investor Sentiment: Mixed for the market.
Small Speculator Sentiment: Mildly Bearish for the market.
Small Hedge Fund/Manager Sentiment: Bearish for the Market.
Longer-term Trend:
Bull Market Condition.
Intermediate-term Trend:
Negative. Un-confirmed and turning.
Short-term (one-day) Signal:
Strong Sell. We're long but will consider shorts later in the day.
We are trading these signals and others intra-day for our Premium subscribers--contact us for details ( http://www.wallstreetsentiment.com/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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The FL/FS is still on a strong FL/FS Sell and flashing another 2X Sell. TSP has 50% Bulls too. Pullback? Maybe, but it may have already been fulfilled on Friday. The bias is higher for Monday, despite the sentiment. Liquidity tends to trump sentiment right now.
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Results of the Wall Street Sentiment Survey (formerly known as the Fearless Forecaster Sentiment) taken after the close on 3/04/11
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: 44%
Weekly BEARS: 28%
Our `Smart Money' Pollees were 67% Bullish and 0% Bearish.
Our Amateur Trader Pollees were 0% Bullish and 75% Bearish.
The Senticator: Bullish.
Last time, our prediction was that they would try to take it down on Monday, but then bring it back. Tuesday would be higher and Wednesday would probably start strong but then pullback Thursday and into Friday, then we would rally again.. They did try to take it down Monday but brought it back into Tuesday, but then they took it down hard. Wednesday started strong, then fell back, then we rallied on Thursday hard. Friday started very weak, but then came back quite a bit late. We did pretty well with that call, only off dramatically on the weakness on Tuesday and the commensurate rally on Thursday. I think we can to take a C+ for that call. Remember, these predictions are for demonstration purposes and are not a substitute for trading discipline.
The new Sentiment Model sat flat.
Proprietary Surveys
This week, the WSS Surveyees are a bit Bullish and the "Smart Money" guys aretoo. The "Amateurs" are Beared up. The Senticator is Bullish. Participation in the surveys was average. We are likely to trade up this week, sooner rather than later.
Message Board Sentiment
The message board sentiment poll shows Bulls at 43% and Bears at 29%. This is Bullish since this crew tends to be right more often than not, short term. Participation was normal. The Actual Position Poll shows 33% fully long and 14% partially long. 5% are partially short and 14% are fully short. This is well below my 20% threshold and that is mildly Bearish. We are still on a stolid FL/FS Sell, though it may be fulfilled. We also have a 2X Sell. This can bring a Sell off but on Monday's these signals have been less than perfect. The 5-day Fully Long/Fully Short (FL/FS) ratio is flashing a Sell at 291%. The Weekly Fearless Forecaster Sentiment Poll shows 61% Bulls implying some sort of sell off 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 51 which is away from a signal, but good activity. 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. Neutral.
10-day P/C ratio: 0.89. Negative.
Equity P/C ratio: 0.57. Neutral.
OEX PC ratio (not a fade): 2.63. Sell.
OEX 10-day PC ratio: 2.10. Sell.
OEX $-weighted* P/C ratio: 2.47. Buy.
NDX $-weighted* P/C ratio: 1.21. Neutral but we're on a Strong Sell from yesterday.
QID (Ultra Short QQQQ) P/C ratio: N/A.
SDS (Ultra Short SPX) P/C ratio: N/A.
ISEE Sentiment Index: 156 vs. 116. Neutral. This is a very big jump and a ST Sell.
10-Day ISEE Sentiment Index: 118. Neutral Coming off a Sell.
Relative VIX: Neutral.
Daily VIX: Sell.
The P/C data are a bit negative. Surprising that there isn't more Bearishness. The biggest concern is the big jump at ISEE and the $-weighted P/C's. This is, however, less important than the positive momentum in the current liquidity context. Market Harmonics' Options Buyers Sentiment Gauge (thank you, Tony Carrion http://www.market-harmonics.com) is now Neutral.
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 fell to 75.00% vs 77.00% last week. We are coming off an IT Sell. The mean exposure went from 65.76% to 70.92%, a decent rise. The maximum short exposure remained at 100% short and the maximum long exposure remained at 160%.
TSPTalk reported 55% Bulls and 32% Bears, vs. 38% Bulls and 52% Bears last week. That's a Hold by their new measures, and that's a Sell by mine. They are using their Bull Market Filter and we are in agreement on that.
AAII is showing 36.79% Bulls and 33.16% Bears. Last week, we had 36.63% Bulls and 36.14%. This is few more Bulls and fewer Bears. That's a small shift. The big shift last week was Bullish and it got us a rally. I'm calling this now Neutral.
Investors Intelligence reported 50.60% Bulls and 19.50% Bears vs. 53.30% Bulls and 18.90% Bears last week. That's a few less Bulls and a few more Bears. We remain in solidly in Sell territory. Bearish for the market.
The Newsletter Advisors were a little less Bullish again at 52.1% net long vs. 58.2% net long last week. Still not good for the market. The Naz advisors are much less Bullish at 46.70% net long vs. 73.30% net long last week. The data are possibly Bearish for the market, though the sharp drop in the Naz Bullishness implied a bounce.
Lazlo Birinyi's site, Tickersense, reported 58% Bulls and 25% Bears vs. 43% Bulls and 21% Bears the prior week. That's a whole lot of Bulls. That's Bearish, with the caveat that this measure has been our least predictive over the past year or so.
Conclusion
Last week, I said we had an unconfirmed IT Sell but that breadth was nowhere near confirming. We had all manner of ST Sell signals from the sentiment but we also had a few near Buys. The market managed some pretty respectable rallies even as it was pretty weak. This is really typical. We're about to prove our value as sentiment and trading experts for the past 2 decades. Sentiment is really just a proxy for READY liquidity. That is, money or inventory (of stock) that is poised to be thrust upon or into the market. So, excessive pessimism implies lots of shorting, and lots of shorts represent a pool of ready demand for stocks, as it is an easy decision to cover a profitable short position. Similarly, too much optimism implies that all excess cash has been deployed to the stock market and that any need or desire to replenish that sideline cash will require an introduction of excess supply to the market. This is why sentiment works, by and large. Now, however, we have another vector working on the market: Liquidity (aka "POMO"). It matters much less if everyone is Bulled up because while much capital has been deployed, there are billions more coming almost every day. Similarly, it matters much more if everyone gets Beared up, as this only adds to future demand for stocks. If our interpretation is correct, this is what we're in for until June, unless they extend the QE2. We will know that the street is beginning to discount the end of this liquidity by a deterioration in breadth Right now, we are a long way from a Sell from cumulative breadth, so until that changes we're in for a generally higher bias.
Near term, the market sure looks like it ought to trade lower and there's plenty of sentiment supporting that. We can allow for a bit of selling, as it's likely desired in order for major players to reload and a bit of bad news tonight or tomorrow might ben the catalyst. That said, weakness is not a lay up, despite our reliable Sells. Mondays tend to be up. The best play is to look for bounces at support and if we can get something that looks like a completed A-B-C correction, to get long for the last run in this market--assuming that the run ends in June. It may not. My call for the week is that they rally it early on Monday, and try to take it back down late, and into Tuesday but closing higher. Wednesday should bring pullback into Thursday and Friday should be up.
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. Momentum is negative. Sentiment for this model is mildly Bearish. The trend is down and unconfirmed. I say we sit flat for now, though we may send out an update to go long.
We are long a double position. Since we've been publishing our ST Sentiment Signals, we've had 225 trades and 147 winners. If you'd like a trial, feel free to contact us ( http://www.wallstreetsentiment.com/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.
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Mark Young
Editor
ABOUT SENTIMENT AND ANALYSIS
The Wall Street Sentiment Survey is taken each Friday from a generally static pool of experienced technical analysts (both private and professional). The Wall Street Sentiment Surveyees 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 the flip side of the equation, if 90% or more are Bullish or Bearish, the odds of them being right over the very short term are huge, but the odds of a major turn (in the opposite direction) soon thereafter are also quite good.
We have also found that when the Wall Street Sentiment Surveyees are evenly split, look for 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 Wall Street Sentiment Survey. We publish this in our Wall St. Sentiment Weekly (a part of our institutional research). These additional tools are our "Smart Money" poll, Amateur Trader survey, and our Senticator. All are proprietary surveys conducted by us.
We have found that the Senticator tends to be right by the end of the week (as much as 82.7% of the time), though it tends to be more accurate in a rising market than a falling one.
The "Smart Money" pollees are very useful when there is divergent opinion. It's generally NOT a good idea to fade the "Smart Money" unless "'EVERYONE'" (all sentiment measures) is in agreement. When in doubt about the meaning of the Wall Street Sentiment Survey, defer to the "Smart Money" poll or fade the "Amateur Survey". The "Smart Money" guys are folks with whom I've worked or whom I've watched for YEARS. They all have different approaches and they're all VERY good (not infallible, just good analysts/traders).
The Amateur Surveyees are your classic more emotional traders who tend to be wrong when they 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 including those conducted by our sister firm, Traders-Talk.com. We also review options data and fund shifts at Rydex. Additionally, we are also the sole publishers of the T-4 indicator created by Traders-talk--which is a fantastic turn indicator.
Subscriptions to Institutional Sentiment and Analysis are $99 per year. This also includes special sentiment updates and reports. Our polls are unique and insightful, and our analysis is some of the most accurate on the Street.
Order today by calling 859-393-3335 or order on-line at wallstreetsentiment.com
