ISA Daily Trade Navigator for 3/01/07
Thursday at 9:08 am
By Mark Young of Equity Guardian Group
Short-Term Sentiment: Negative.
Overall Intermediate-Term Sentiment: Negative.
Individual Investor Sentiment: Neutral.
Small Speculator Sentiment: Mixed, leaning BEARISH.
Small Hedge Fund/Manager Sentiment: Negative.
Longer-term Trend: Positive.
Intermediate-term Trend: Negative.
Short-term (one-day) Signal: Neutral.
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'll advise if we re-enter. It could be soon.
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Message Board Sentiment
The message board sentiment poll has Bulls at 32% and Bears at 46%, which is Bearishsince these guys tend to be right (at least for a bit) more often than not. Participationwas below normal. The Actual Position Poll shows 14% fully long and 18% partially long.That's a goodly drop in Bulls. 18% are partially short and 21% are fully short. This isfinally above my 20% threshold. There is much less Bullishness and the Bears are startingto get positioned. That said, it's not enough, in my view. We've got too many shellshocked longs out there hoping for a bounce and not enough confident shorting. I'mthinking that we will want to see many more fully short Bears. This may happen on a bounceand it could suggest that a reversal is in place. For now, look for more weakness nearterm.
Our T-4 Turn Indicator went out at 106, which is still in a signal mode, I'mthinking that this is just part of the prior Sell. We want to see readings above 80 orhigher before we look for worthwhile turns. This indicator doesn't catch every top andbottom, but it is a great "Heads up!" indicator.
Options Sentiment
Daily P/C ratio: 1.08. Neutral.
10-day P/C ratio: 1.09 Neutral to constructive.
Equity P/C ratio: 0.73. Constructive.
OEX PC ratio: 1.08. Weak Buy.
OEX 10-day PC ratio: 1.63. Neutral.
OEX $-weighted* P/C ratio: 1.94. Constructive.
QQQQ $-weighted* P/C ratio: 1.86. Neutral.
ISEE Sentiment Index: 114. Neutral.
The options data are supportive, but not screaming Buy. I think I'd like to see somereally excessive readings here, and not just from pro's positioning and hedging theirspreads. The OEX will probably tell us when to look for the turn.
The ISEE Sentiment Index indicator is contrarian; traditionally, over 200 is toooptimistic, under 100 too pessimistic. I've loosened that a bit in recent months. Readingsover 2.0 are Bullish and near 0.5 are Bearish. $-weighted P/C data courtesy of Fari Hamzeiof www.hamzeianalytics.com.
General Public Polls
AAII reported 36.63% Bulls and 39.60% Bears vs. 53.85% Bulls and 22.31% Bears. This isa solid Bearish shift in the face of some not insignificant weakness. That's good news forthe Bulls. These folks will be back in Buy territory on any sustained weakness. InvestorsIntelligence, disturbingly, reported that Bulls rose a bit to 50.5% vs. 50.0%, butBears rose a bit to 24.20% vs. 22.20%. This occurred during a period that included someweakness. More confidence by the Bulls in a sloppy market is not good. Overall, thisindicator remains in Sell territory, as it has for 19 weeks. LowRisk reported 26%Bullish vs. 30% Bullish last week, and 47% Bearish vs. 45% Bearish the previous week. Thisis still a lot of Bearishness though the market was a bit sloppy into Friday. This impliesthat less sophisticated traders are still quick to turn Bearish and that's Bullish (thoughit won't preclude a little bit of selling). Last week, Mark Hulbert reported thathis HSNSI fell again by more than 6 percentage points to 47.6%. This is down from70.8% at its peak in November. Mr. Hulbert thought that the last drop was good newsfor Bulls, but I noted that stocks will often fall AFTER such shifts from excessiveBullishness. The recent drop isn't a bad sign, but it may also be indicative of a fallingmarket. I take this as a neutral reading. If it continues and we see more Bearishness,still, I'll begin to view this as Bullish. Irrespective of what others may say, risingBullishness isn't necessarily Bearish and rising Bearishness isn't necessarily Bullish.Context is key. Now, if we see rising Bullishness on any further weakness, that'sunambiguously Bearish.
Rydex Sentiment
We are beginning to like our recent approach to the data and will continue as we workon a more useful indicator for trading asset shifts. Rydex non-Dynamic Bull funds had$10MM of (net) outflows on a rally day which is Bullish, but pretty reasonable, too. Thenon-Dynamic Bear funds saw $7MM of (net) inflows. There's some Bearishness among the leastsophisticated traders, but there is ample reason for them to be much more Bearish, too.The Dynamic funds surprisingly saw Bull fund (net) sells of $84MM (though this onlypartially reversed yesterday's buys) and saw small Bear fund purchases of $7MM. Looks likethere's plenty of complacency. The RSO showed an $88MM Bearish asset shift on a nicerally. Ordinarily, this would be Bullish, but there was simply very little real shortinggoing on. I'm much more concerned about the ample BULLISH asset shifts on the huge downday Tuesday.
Conclusion
Last time, we said that despite the overnight bounce, I did NOT like what I was seeing,especially FALLING Bearishness, dip buying and short-covering and not just by activetraders but by the least sophisticated Rydex players. I was open to a bounce thanks to theVIX, but I figured that the bounce wouldn't hold. Well, it didn't and at this writing, themarket is getting killed in after hours trading. The good news is that AAII is gettingBearish again. The bad news is that we really don't see that much Bearishness as yet inour data. We have to be looking for lower price. I'm not an advocate of a major Bearmarket, by any stretch, but until we see some more real pessimism, we're likely on our wayto test (read: "Poke through") the 200-day SMA. The one thing that would get meshort-term Bullish is renewed Bearishness on a rally. Do watch out for sharp bounces atany time. Don't be a complacent Bear.
We do not have a ST Sentiment signal. Yesterday, we got a little cute and just missedbeing short near the highs. Penny wise and pound foolish. It cost us 25 points of missedprofit. Since we've been publishing our ST Sentiment Signals, we've had 38 trades and 27winners.
The Mechanical model went long at 145.83 and stopped out at 143.75. The Subjective Modelwent 1/2 long at 140.39. Stop this at 138.89. Sell at 141.39.
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Ideal ETF Portfolio (tracking portfolio):
100% Money Market.
We're flat. We'll advise if we re-enter. It could be soon.
*******************************************************
Past performance is no guarantee of future returns. All information included in thismissive is derived from sources we believe to be reliable, but no guarantee can be made tothat effect. None of the forgoing should be construed as an offer or solicitation to buyor sell any security. The publisher may have a long or short position in the funds orsecurities discussed at any given time. We aren't your advisor, unless you have a signedcontract 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.WallStreetSentiment.com
Mark Young
Editor
800-769-6980
859-393-3335
