3 replies to this topic

[OEXCHAOS]

I've discussed this before, but since there are new faces around and some discussion of Sentiment, I thought that I'd share my approach to Sentiment. First of all, I think that all the sentiment that matters can be broken into three "exploitable" groups. 1) Individual Investors, 2) Indvidual Speculators, 3) Small Hedge Funds. Usually, several weeks prior to important tops, you'll get all 3 sectors all Bulled up. As the final top is made, however, often one or more sentiment measures back away from overly Bullish levels. Lots and lots of bulls often means nothing if the uptrend is sound enough. Most important tops are made with only modestly Bulled up readings on many measures. Over the shorter-term, you can see a decent correction with only one of the sentiment sectors being all Bulled up. We got that last year at about this time. It doesn't need to come, of course, but when you've got the set up, you wait for confirmation from trend and/or breadth. Maybe seasonality will play into it, too, but price has to be the final arbiter. If you don't have the original sentiment set up for a Sell, I find it unwise to take shorts for more than a few days, if that. Mark

[da_cheif]

Category: General Interest
From: deuxsous (Tom Drake)
To: ALL
Date Posted: May 07, 2007 at 09:32:29
Subject: between the hedges




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http://hedgefundmgr.blogspot.com/
BOTTOM LINE: Overall, last week's market performance was bullish as the DJIA hit another all-time high and the S&P 500 is off to its best start to a second quarter since 2004. The NYSE cumulative advance/decline line rose to an all-time high, most sectors gained and volume was above average on the week. Measures of investor anxiety finished the week modestly above average levels. However, the AAII percentage of bulls fell to 28.57% this week from 39.24% the prior week. This reading is now at depressed levels. The AAII percentage of bears soared to 54.29% this week from 37.97% the prior week. This reading is now at elevated levels. These pessimistic readings come as the DJIA is in the middle of its most prolific winning streak since 1955. The 10-week moving average of the percentage of bears is currently 38.82%, an above-average level. The 10-week moving average of the percentage of bears peaked at 43.0% at the major bear-market low during 2002. Moreover, the 50-week moving average of the percentage of bears is currently 37.9%, a very high level seen during only two other periods since tracking began in the 1980s. Those periods were October 1990-July 1991 and March-May 2003, both being near major market bottoms.

The extreme readings in the 50-week moving average of the percentage of bears, during those periods, peaked at 41.6% on January 31, 1991 and 38.1% on April 10, 2003. We are very close to eclipsing the peak in bearish sentiment during the 2000-2003 market meltdown, which is astonishing considering the macro backdrop now and then.

I continue to find that steadfastly high bearish sentiment in many quarters is mind-boggling, considering the 25.1% rise in the S&P 500 in just over ten months, the 104.3% gain for the S&P 500 since the 2002 major bear market lows, the NYSE cumulative advance/decline line hit a new record high last Wednesday, all market-caps and styles are participating, the market had one of the best August/September/October runs in U.S. history, the fact that the Dow made another all-time high Friday and that we are in the early stages of what is historically a very strong period for U.S. equities after a midterm election

[golden]

Most important tops are made with only modestly Bulled up readings on many measures.

Very true.

[Iblayz]

Yea and everybody talks about how sentiment is soooo bearish. Maybe that's what they are searching for. From Yahoo finance..... Where will the Dow end 2007? Above 13,500..........50% 13,001 to 13,500.....24% 12,501 to 13,000.....12% Below 12,500..........16% 84981 Votes to date