ISA Daily Trade Navigator for 3/13/08
Wednesday 3/13/2007 at 9:03 am
By Mark Young of Equity Guardian Group
Short-Term Sentiment: Neutral.
Overall Intermediate-Term Sentiment: Bullish.
Individual Investor Sentiment: Very Bullish.
Small Speculator Sentiment: Very Bullish.
Small Hedge Fund/Manager Sentiment: Very Bullish.
Longer-term Trend: Bear.
Intermediate-term Trend: Bearish.
Short-term (one-day) Signal: None. We look both ways.
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% long UWM at 50.61
I'm about fully long and mighty nervous again.
Introduction
The late volume was Bullish but I didn't like the look of the trading late. The news is bad, and looking worse than many had hoped. Counter-party risk is the watch word and that can imply some serious weakness. Sentiment is supportive but some factors overshadow sentiment. II flashed the most beared-up reading in 13 years.
Message Board Sentiment
The message board sentiment poll now shows Bulls at 21% and Bears at 50%. This is Bullish, since readings above 50% are a fade, even though this crew tends to be right more often than not, at least for a bit. Participation was well below average. The Actual Position Poll has 14% fully long and 32% partially long. 12% are partially short and 32% are fully short. This is well above my 20% threshold and shows considerable volatility in the confidence levels. That's Bullish, but the big problem that I see is the large number of partially long Bulls. Near term, that's almost always a prescription for a shot down to shake those weak hands loose. The 5-day Fully Long/Fully Short ratio got a hair from Buy territory but now it is above 100%. It did decline steeply yesterday, however.
(Click above for larger image)
Our T-4 Turn Indicator went out at 61 which is away from a signal. I was thinking that we got a short-term Buy Tuesday but I could be wrong. 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: 1.11. Constructive.
10-day P/C ratio: 1.23. Buy.
Equity P/C ratio: 0.84. Buy.
OEX PC ratio: 1.46. Weak Sell.
OEX 10-day PC ratio: 0.95. Buy.
OEX $-weighted* P/C ratio: 6.82. Strong Buy. Odd however.
QQQQ $-weighted* P/C ratio: 1.29. Neutral.
ISEE Sentiment Index: 102. Neutral to positive.
Relative VIX: Neutral.
The options data are still supportive but something is up with that high $-weighted OEX P/C ratio, but I'm not thinking that it's as Bullish as it looks. When we see odd readings like that they are often not a fade. Market Harmonics' Options Buyers Sentiment Gauge (thank you, Tony Carrion http://www.market-harmonics.com) is about at levels that marked prior lows of importance and is falling again. Tony informs me that this indicator was about 3 weeks early at the 2003 low (with readings just a bit below today's) Overall, this is constructive.
The ISEE Sentiment Index indicator is contrarian; traditionally, over 200 is too optimistic, under 100 is too pessimistic. *$-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
Last week, AAII reported 20.42% Bulls and 59.15% Bears vs. 21.98% Bulls and 51.65% Bears. Another drop in Bullishness and a big rise in Bearishness. We remain firmly in Buy territory and we've been here for 18 of the last 19 weeks, which supports a rally of more significant duration. In the last 20 years, there have been two instances of similar or more excessive Bearishness. One was in 1993 while the market slowly ground higher and the other was in 1990, while the market declined for 3 months. If the fractal holds, we ought to get a few weeks of rally from here or somewhat lower soon before a sharp pullback.
Investors Intelligence reported that Bulls fell hard to 31.10%, and Bears jumped big to 43.6% vs 41.9%, and 36.6%. That's a huge Bearish shift and it gets us well into Buy territory. This is the lowest reading since 1994. That's a Buy signal on any sort of turn.
LowRisk.com shows 36% Bullish vs. 41% last week and 47% Bearish vs. 41% last week. That's somewhat Bullish, but not dramatically so. Note that this poll was completed Sunday. We've had plenty to be confused about since then.
Mark Hulbert's HSNSI fell to -25.9% (net short) and Nasdaq advisors got more Beared-up at 53.6% (i.e. over 1/2 short). That's a lot of Bearishness. When and if we bottom, I suspect that a rally will be lead by the Nasdaq. We will probably see higher levels of Bearishness, but this is more than enough to support a good rally.
Lazlo Birinyi reports that Bulls were at 38%% and Bears were at 43% in his poll, which is much less Beared up but also not far off (one vote) dead neutral. This may mirror the WSS Survey (as it has been recently).
TheStreet.com is showing 28% Bulls and 55% Bears on good participation. That's a tiny bit less Bearish, but still way down in Buy territory. We're coming out of almost as many Bears as going into the January low.
TSPTalk's weekly poll showed 36% are Bullish and a whopping 61% are Bearish. That's Bullish. Participation was down a bit but even in a Bear market, anything near 60% is pretty Bullish.
Rydex Sentiment
Our Rydex data showed Bull funds had $30MM (net) inflows on a nasty reversal down. This is aberrated by what appears to be one of two big buys of an S&P Fund. This is probably not indicative of sentiment. The rest of the funds saw modest sales. The non-Dynamic Bear funds saw $1MM of (net) outflows. It looks like the amateurs were largely confused. That's possibly Bearish. Dynamic Funds saw net Bull fund buys of $78MM, and Bear fund net sells of $50MM. The Dynamic players appear to be dumping shorts and going long, in size. That might be that big smart money trader again, but it was in the S&P, not the Naz. This data isn't as useful as it once was. The often-right Russell Dynamic player(s) are adding some shorts.
Conclusion
Last time, I said that the rally could go on for a while, and that the Fed action would go a long way toward offsetting some of the uncertainties and counter-party risk in the credit markets. Well, maybe, but the global markets don't think so and their worried that Carlyle is just the first problem. They may be right. It throws us into a "Crash scenario" too. The sentiment is very Bullish here for the market but panics aren't rational and they can often get crazy. Make no mistake, there are those who are panicking and there are many would could follow. The flip side is that there are powerful forces aligned that don't want things to fall apart here. That means that things could easily find their feet today, too. Be very flexible and keep your head.
The Mechanical Senticator went long at 129.80 and sold at 133.20 for a nice trade. The Subjective Senticator Model just missed buying 1/2 on a limit of 127.25. We'll pass on this trade, today. Remember, these models must trade in the direction of the Senticator or not at all.
We do not have a ST Sentiment signal. The late volume tell was quite Bullish. We're looking long. Since we've been publishing our ST Sentiment Signals, we've had 83 trades and 57 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.
Ideal ETF Portfolio (tracking portfolio):
50% long DIA at 127.54.
50% long UWM at 50.61
I'm about fully long and nervous again.
Past performance is no guarantee of future returns. All performance should be considered to be hypothetical unless explicitly stated otherwise. 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.
For more on using the ISA and the various sentiment poll data, click here: www.WallStreetSentiment.com
Mark Young
Editor
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