Institutional Sentiment and Analysis
Thursday 8/04/2011 at 9:40 am
By Mark Steward Young
Short-Term Sentiment: Mildly Bullish.
Overall Intermediate-Term Sentiment: Mixed-to-Bullish for the market.
Individual Investor Sentiment: Mixed-to-Bullish for the market.
Small Speculator Sentiment: Bullish for the market.
Small Hedge Fund/Manager Sentiment: Mixed for the Market.
Longer-term Trend:
Bull Market Condition. Under attack.
Intermediate-term Trend:
Negative. Confirmed.
Short-term (one-day) Signal:
None. We're looking both ways.
We are trading these signals and others intra-day for our Premium subscribers--contact us for details ( http://www.wallstree...om/contact.html).
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The Options Oscillator is just a touch away from a Buy. The FL/FS Strong Buy is not far from a 2X Sell, but frankly I view that as more Bullish, than Bearish. Lots of hedging out there. AAII had a big Bearish shift. II, not so much.
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Message Board Sentiment
The message board sentiment poll has Bulls at 43% and Bears at 35%. This is Bullish, since this crew tends to be right, more often than not. Participation was normal. The Actual Position Poll shows 22% fully long and 22% partially long. 9% are partially short and 13% are fully short. This is below my 20% threshold and that is mildly Bearish. The FL/FS Strong Buy is spent and we are now netural (though we are close to a 2X Sell). I'm not taking the large number of Bulls as Bearish. I'd be looking for a turn on this data, actually. The 5-day Fully Long/Fully Short (FL/FS) ratio is Bullish at 68%. Watch for a turn.
You can check out Traders-Talk.com for early updates of the sentiment polls every day and overnight here: http://www.traders-t...php?showforum=2.
Our T-4 Turn Indicator is at 39 which is away from a signal but good activity. 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: 1.31. Buy.
10-day P/C ratio: 1.02. Neutral but getting up there.
Equity P/C ratio: 0.79. Weak Buy..
OEX PC ratio (not a fade): 1.13. Weak Buy.
OEX 10-day PC ratio: 1.37 Neutral
OEX $-weighted* P/C ratio: 0.99. Neutral.
NDX $-weighted* P/C ratio: 1.09 Neutral.
QID (Ultra Short QQQQ) P/C ratio: N/A.
SDS (Ultra Short SPX) P/C ratio: N/A.
ISEE Sentiment Index: 82. Buy.
10-Day ISEE Sentiment Index: 109. Neutral.
Options Oscillator: -19. Neutral. Very close to a Short-term Buy.
Relative VIX: Neutral.
Daily VIX: Buy.
The Options Oscillator is close to a Buy but no dice. The last Buy managed to do OK IF you were nimble and courageous. The $-weighteds are all neutral. Market Harmonics' Options Buyers Sentiment Gauge (thank you, Tony Carrion http://www.market-harmonics.com) is Neutral.
(If the chart is corrupted, use this link: http://www.market-ha...nt/obsglong.gif )
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
AAII is showing 27.16% Bulls and 49.85% Bears. Last week, we had 37.84% Bulls and 31.82% Bears. This a huge Bearish shift. That's definitely a short-term Buy, and while still neutral, it's only a tiny shift away from an IT Buy.
Investors Intelligence reported 46.30% Bulls and 24.70% Bears vs. 49.50% Bulls and 21.50% Bears last week. A few less Bulls and a few more Bears. This is not good. There ought to be a lot more Bearishness and there isn't. The market will probably need many more Bears here before it can make a good bottom.
The Newsletter Advisors were more Bullish at 21.60% vs. 48.10%. That's a big drop and while not exactly a strong Buy, it's Bullish. The Naz advisors got much less net long at 7.80%, vs. 39.60%, net long last week. That type of a drop is a Buy. It's at low levels too. Take your buys.
Lazlo Birinyi's site, Tickersense, reported 37.04% Bulls and 33.33% Bears vs. 42.31% Bulls and 32.46% Bears the prior week. That's a good deal less Bulls and that's Bullish for the market but it's not a Buy. Caveat: this measure has been our least predictive over the past year or so.
National Association of Active Investment Managers (NAAIM) Sentiment Survey reported that the Median market exposure fell to 50% from 66%. That's a big shift, though not a signal. That fast a shift may be Bullish. We're still technically on an unconfirmed IT Sell and we have not reset, though we got very close to an IT Buy six weeks ago and it might have been close enough. The mean exposure went from 66.30% to 62.70%, a goodly drop. The maximum short exposure dropped hard from 125% to 55% short, and the maximum long exposure remained at 200%. So, the most aggressive Bulls stayed just as Bullish, and the most aggressive Bears covered up. That's worrisome, but the mean and median exposure levels suggest that we're OK.
TSPTalk reported 36% Bulls and 55% Bears, vs. 54% Bulls and 34%Bears last week. That's a hold by their new measures, and that's a Buy by mine. They are using their Bull Market Filter and we are in agreement on that.
Conclusion
Last time, I said that sure, we were due a rally and that we could get one at any time, but until the system got utterly clogged with shorts, it was too hard to put the odds at your back on longs. I was also beginning to question the Bull market. The good news was that the market will often rally when it pokes through the 200-day SMA and we had. The reversal yesterday may have been it. We're currently weak in the overnight. I'm thinking that we're in for some "multi-swing action" if we don't fall apart. THAT will set up a better base from which to launch a better rally. The hedging data shows more shorting and that's good, but we don't yet see enough Bearishness from the Advisors. The Options are OK, but we probably shouldn't probe for a low until NAAIM says that we should (they report today). Momentum turned up and gave a Buy. A "head-fake" and "double pump" could well launch a REAL rally.
We have switched to a more robust sentiment approach with a momentum and trend overlay. Momentum gave a buy. The Sentiment for this model is better. We bought a 1/2 position in the SPY at 133.20. We bought another half at 130.75. .
We are looking both ways. Since we've been publishing our ST Sentiment Signals, we've had 289 trades and 180 winners. If you'd like a trial, feel free to contact us ( http://www.wallstree...om/contact.html) or sign up here.
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 .
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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
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