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It is becoming clearer by the week that the rally that was ignited last August on the heels of QE2 is running out of gas. If prices did move higher, it is possible that this could be construed as bullish as it does take bulls to make a bull market. But being so late in the rally, it would seem that any potential gains would be just crumbs to the gains that have already been made. Furthermore, without a sell off to move investors and cash to the sidelines, it is hard to see a rally of any significance developing. Call me a non-believer, but the market really needs to sell off and investors need to turn bearish (i.e., bull signal) before any real umph returns to this market.
Showing posts with label Market Sentiment. Show all posts
Showing posts with label Market Sentiment. Show all posts
Saturday, May 14, 2011
Sunday, May 8, 2011
Investor Sentiment: The Devil is in the Details
While the main indicators barely budged week over the week, components used to construct these indicators are starting to head towards extremes.
Thursday, May 5, 2011
I Hope You Were Not One of Those Buying
Monday's market action saw some of the strongest buying amongst the Rydex market timers in over 10 years. Oops!
Tuesday, May 3, 2011
Investor Sentiment: Shorts Giving Up?
Echoing a theme I highlighted in the weekly look at investor sentiment, here is an article from MarketWatch on David Einhorn, head of hedge fund firm Greenlight Capital. It seems as though Greenlight Capital closed a significant number of short positions in quarter 1 not so much because of fundamental reasons but because the market only goes up.
Sunday, May 1, 2011
Investor Sentiment: Why Bet Against the Market When It Only Goes Up?
Why bet against the market when it only goes up? After almost 2 years of a seemingly relentless upwards move with only one real buying opportunity, market participants have clearly become accustomed to the notion that the market never goes down. This is a sign of true complacency. I am not calling for a market top or the start of a bear market -- there are too many "Johnny come lately's" willing to buy at the sign of any weakness --but let's be clear: investors are becoming comfortable with the market. The dips are becoming shallower and I suspect the peaks (or time at new highs) won't last as long as well. While it is always important to buy low and sell high, I believe this will really be important going forward as the margin for error increases as sentiment becomes exceedingly bullish. This requires patience and discipline, which are characteristics few investors and traders demonstrate. I can easily be constructive on exposure to the equity market, but in the absence of a sell off, it is hard to see adding exposure.
Saturday, April 23, 2011
Investor Sentiment: Waiting On the Fed
The sentiment indicators are not particularly revealing, but then again price on the SP500 really hasn't gone anywhere either for the past 3 months. Maybe investors are waiting to see how much longer the Fed plans to keep the monetary spigots turned on full blast. I guess we will have our answer this week. Insiders are neutral, and the "dumb money" indicator is neutral as well. Higher prices are likely to bring more bulls into the ring, and paradoxically to the normal contrarian point of view, this would likely be bullish for prices as it does take bulls to make a bull market. Higher prices will lead to increasing bullishness until it doesn't. These kinds of moves are generally seen in the late stages of a bull market, and they can be fast and exciting as they are fueled by short covering. But until that happens, well there isn't that much to do. All eyes and ears will be on the Fed.
Saturday, April 16, 2011
Investor Sentiment: The Bulls Love This Market
The number of bulls continue to increase as the "dumb money" indicator approaches extreme levels. I am not sure what these investors are seeing, but we do know that higher prices will bring out the bullish instincts. Putting our own emotions aside and looking at the data, extremes in bullish sentiment this late in a bullish run are better sold (i.e., lighten up on long exposure) than bought.
Thursday, April 14, 2011
Comments from 4.5.11 Rydex Report
Figure 1 shows the comments from the April 5, 2011 Rydex Report for subscribers to our Premium Content.
Sunday, April 10, 2011
Investor Sentiment: Is It Time to Bet the Farm?
Investors continue to do what they do best: react to price changes. Prices are up over the last 3 weeks and as expected, investors have become increasingly bullish. Is it time to join the party and bet the farm? Some investors seem to think so. While it does take bulls to make a bull market, there is no indication at this point that this scenario will unfold. For now, investor sentiment is neutral and not worthy of betting the farm.
Monday, March 28, 2011
The Will Robinson Signal: What's Next?
The Will Robinson signal is when excessive bullish sentiment occurs at a time of rising inflationary pressures as measured by our composite indicator that assesses the trends in the CRB Index, gold, and yields on the 10 year Treasury. The signal gets it name from the robot (whose name was B-9) on the TV program "Lost In Space", who use to flail his arms and yell "Danger, danger, Will Robinson" when he sensed the young lad was in trouble. Typically, the Will Robinson signal means danger for the stock market.
Sunday, March 27, 2011
Investor Sentiment: Not Compelling
Although equities were up nicely week over week, investors are not in a mood to chase prices higher. Investor sentiment is neutral, and to me, this suggests that there is nothing very compelling regarding the current market environment.
Sunday, March 20, 2011
Investor Sentiment: Leading Price Lower
Extremes in investor sentiment were seen over 2 months ago while the high in prices was seen 5 weeks ago. Often times, indicators of investor sentiment precede moves in the markets. After all, the markets represent the collective opinions of its participants. At present, investors are viewing the markets unfavorably, but their opinions are by no means extreme. In the absence of bearish extremes in sentiment, I would expect equities to remain under selling pressure.
Sunday, March 13, 2011
Investor Sentiment: Neutral
Investor sentiment is neutral. As expected, bullish enthusiasm has been on the wane as prices have pulled back over the past 2 weeks. The bulls hope that this is the pause that refreshes, and the bears (if there are any out there) hope that the highs have been seen. From a sentiment perspective there is little edge to the data. Such short term pullbacks may bring in buyers, but this is not the set up that would lead to sustainable or accelerated gains.
Sunday, March 6, 2011
Investor Sentiment: No Change
Bullish extremes in investor sentiment continue to persist, and company insiders remain lukewarm regarding their own company's shares. I believe last week's variant analysis continues to be correct as waning (but still extreme) bullish sentiment shows that investors are less enthusiastic about the market's prospects. In other words, we have seen the extremes in sentiment which means the market is rolling over forming an intermediate term top
Sunday, February 27, 2011
Investor Sentiment: An Alternative Interpretation
I have often contended that there are two ways to interpret sentiment data. The first is as a contrarian. Figure out when too many investors are on one side of a trade and bet the other way. This is the "traditional" way most interpret this kind of data. The second method of interpretation is based upon the fact that investor sentiment will track the movements of price. So as prices move higher, we would expect bulls to increase; as prices move lower, we would see investors express their bearishness. It is the rare situation (believe it or not) where investor sentiment and price actually deviate. To read more on variant uses of sentiment click here and here.
Wednesday, February 23, 2011
The Rydex Market Timers
Two consecutive down days in the equity markets must seem like Armageddon for those whom forgot the markets can go both ways. But let's be real. Nothing has happened. A 3% down draft in two days after a 30% moonshot in the SP500 over the past 6 months is nothing, and at best, this week's events serve to remind investors that markets MAY go in both up and down directions. Risks have been rising for awhile, and it is just not because the bullish (sic: foolish) extremes in sentiment. Rising and persistent trends in the CRB Index, gold, and yields on the 10 year Treasury are significant headwinds. Crude oil had a high probability of trading higher. Something had to give, and investor sentiment is just one part of the market puzzle.
Sunday, February 20, 2011
Investor Sentiment: Is Three the Charm?
As I have been alluding to over the past couple of weeks, anticipating a correction (beyond 1% from the near term highs) in the equity markets has been very brutal. This market has made road kill of a lot of analysts and indicators. With that being said, this week's sentiment update not only has the "dumb money" being bullish (as expected) but company insiders (the "smart money") have increased their selling significantly. This is the third time since November, 2010 (when the Fed started asset purchases) that these three indicators have been aligned in such a manner. Will the third time be the charm leading to a correction and a better risk adjusted buying opportunity?
Monday, February 14, 2011
Sunday, February 13, 2011
Investor Sentiment: Very Brutal
As expected, the bullish extremes in investor sentiment persist. Company insiders continue to unload shares at a high rate. As I have brought forth over the past couple of months, these data points (and those of most analysts) have not mattered as the major indices keep marching higher. It has been very brutal if you are anticipating a correction. It has been brutal if you are short, and it has been brutally hard to sit on your hands and do nothing while you wait for an entry point that is more than 1% below the recent highs. At this point, divining when a meaningful correction will happen is only guess.
Sunday, February 6, 2011
Investor Sentiment: The Superman Market
"Faster than a speeding bullet! More powerful than a locomotive! Able to leap tall buildings at a single bound!"
"Look! Up in the sky!"
"It's a bird!"
"It's a plane!"
"It's Superman!"
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