|Wall Street Sentiment Weekly Report 7/29/07
Published Sunday 7/29/2007
By Mark Young of Equity Guardian Group
Short-Term Sentiment: Neutral to Bullish.
Overall Intermediate-Term Sentiment:
Individual Investor Sentiment: Neutral to Bullish.
Small Speculator Sentiment: Neutral to Bullish.
Small Hedge Fund/Manager Sentiment:
Longer-term Trend: Positive.
Intermediate-term Trend: Negative.
Short-term (one-day) Signal: None,
but I'm looking long.
We are trading these signals intra-day with Premium
subscribers--contact us for details.
Ideal ETF Portfolio (tracking portfolio):
50% Short SPY at 151.
50% Short SPY at 152.
We're fully short. We may dump or shift 1/2 to the ITW on a bounce.
This week, we've got some very mixed
sentiment and a big heads up for a turn. See the two new charts below.
I'm pretty sure that whatever low we make will be tested soon too, from
what the sentiment story is showing.
Results of the Wall Street Sentiment Survey (formerly known as
the Fearless Forecaster Sentiment) taken after the close on 7/27/07
Response was to this question: "At the end of next week will the S
& P 500 close up (bull), down (bear), or unchanged/no opinion
Weekly BULLS: 50%
Weekly BEARS: 19%
Our `Smart Money' Pollees are 100% Bullish and 0% Bearish.
Our Amateur Trader Pollees are 67% Bullish and 0% Bearish.
The Senticator is Bullish.
Last time, I said that my call would be "for choppy weakness into
Wednesday and then a bounce. This is a market to be flexible in. I
still believe that we'll be testing the lows again, but it may be after
we get whatever bounce we get (and it may well be to new highs). "
Well, I was dead right into Wednesday, and we did get a bounce, but
then the wheels fell off this market. We did, however, manage to test
the lows. Of course, we took them out. I think we can take a B- thanks
to getting the general bias right, but we were dead wrong on the
prospect for a bounce late in the week. In our defense, our Wednesday
morning letter showed our change of heart when we wrote, "The amateurs
have been trained, it seems, to buy the dips. We've got 4 days to get a
rally from the MACD Sell Fade. Frankly, if it rallies today, we ought
to short it." Now, that's not much help to weekly players, but then
that's why we look at the sentiment every day, because when you near
support and see absolute confidence among the biggest amateurs, it's
time to re-valuate one's Bullishness.
The Mechanical Senticator model went long at 154.10 and exited at (per
ISA Daily instruction) 152.10 for a loss. The Subjective Senticator
Model went 1/2 long at 150.76 and at 150.25 per ISA Daily updates, and
exited at 150.51 Thursday for a dandy break even. The Subjective Model
bought a full position at 146.45 and we advised by alert for traders to
hold over the weekend. Note that the Senticator Models are based upon
only one indicator and do not reflect our overall opinion. If the
Senticator is Bearish or Bullish, the Mechanical model HAS to go short
This week, the WSS Surveyees are
learning heavily Bullish on low participation, which is surprising. The
"Smart Money" guys are 0% Bearish and 100% Bullish, and those in our
survey of "amateur" (more emotional) traders are getting Bulled up,
which is again, not so Bullish. That's not a lot of help for the
market, but the Senticator does suggest that we can get a bounce this
week. It's just that there's some pain likely.
Message Board Sentiment
The message board sentiment poll
shows Bulls at 43% and Bears at 39%, which is Bullish since these guys
tend to be right more often than not. Participation was about normal.
The Actual Position Poll has 18% fully long and 22% partially long. 12%
are partially short and 20% are fully short. This is right at my 20%
threshold, and that's neutral. There are an awful lot of Bulls,
however, given the damage. Of course, these guys get positioned right
often and there's not much confidence among Bulls. Now that we are in a
down trend, the Fully Long Bull/Fully Short Bear ratio needs to be
below 60% to give a Buy. We're at 89% and rising. The weekly Fearless
Forecaster Poll shows 64% Bulls at this point, which is Bearish.
Check out www.traders-talk.com
for early updates of the sentiment polls every day.
Our T-4 Turn Indicator went out at 90 which is a signal. I think
this one is a repeat Buy. I think it's worth a shot, but it's clearly a
risky trade. The last clear signal was last Friday, a Sell. We might
call Tuesday's signal a "Buy for a bounce" or a follow on Sell, but it
sure wasn't very Bullish. 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.
Daily P/C ratio: 1.38. Buy
10-day P/C ratio: 1.12. Neutral.
Equity P/C ratio: 0.77. Buy (but we can and should go higher).
OEX PC ratio: 1.03. Buy.
OEX 10-day PC ratio: 1.57. Bearish.
OEX $-weighted* P/C ratio: 3.75. Screaming Buy.
QQQQ $-weighted* P/C ratio: 1.75. Neutral. Why no Buy?
ISEE Sentiment Index: 132. Surprisingly high.
Relative VIX: Buy.
For a discussion and additional charts of the Relative VIX, click here:
The options data are looking much
more Bullish, especially the OEX data. The Relative VIX is also saying
that a good trading low is near. Still, what's up with those QQQQ P/C's
and ISEE? We can make a low at any time, but this data says that we
need to be on the lookout for more ugliness at any time.
The ISEE Sentiment Index indicator is contrarian; traditionally, over
200 is too optimistic, under 100 is too pessimistic.
General Public Polls
The Street.com reported a big drop in Bulls to 34% and a jump in
Bears to 42%. This is a fairly big shift, but usually rallies begin
with a bit les Bullishness in this poll. TSPTalk, a large site
devoted to Thrift Savings Plan management and personal finance is
flashing a Buy with 45% Bulls and 41% Bears. That's a Buy by their own
standards, but I'm not really comfy with that. Last week, AAII reported
44,21% Bulls and 36.84% Bears vs. 41.77% Bulls and 36.77% Bears. This
is a solid increase in Bullishness in a sloppy market. While we are a
long way from Sell territory, that's Bearish. Investors
Intelligence reported that Bulls rose to 53.9% vs. 52.30%, and
Bears fell back to 18.00% vs. 19.30. The shifts were fairly modest, but
they showed more Bullishness as the market was curling over. That's
even more Bearish than before. LowRisk.com reported that their
sentiment poll ended Sunday was 31% Bullish vs. 30% Bullish last week,
and 40% Bearish vs. 53% Bearish the previous week. This is a
surprisingly bullish shift after a nasty expiration. I'm thinking
that's Bearish. Mark Hulbert's HSNSI fell to 41%
and that's a solid drop in Bullishness. That's not much help to the
Bears, but it's not enough to really support a rally in a down
trend--if that's what we have. Basically Neutral. Lazlo Birinyi reports
that his Blogger Poll has 26% Bulls and 34% Bears. That makes some
sense, but it's also a lot of Bears. Nothing that suggests big weakness
Our Rydex data shows that non-Dynamic
Bull funds had $1MM (net) outflows on another ugly day. There was $3MM
in S&P fund buys. The non-Dynamic Bear funds saw barely $1MM of
(net) inflows. It looks like amateurs are doing minimal selling and
little buying of Bear funds. No real fear there. That's still Bearish.
Dynamic Funds saw net Bull fund buys of $25MM, and Bear fund net sells
of $6MM. The Dynamic players were going back long. I have no idea what
these guys are thinking or doing, but they may have bailed at the early
cut-off and then re-bought at the late cut-off. That could be Bullish.
The RSO showed a $41MM Bearish asset shift on another big down day.
This is no signal but it's not Bullish, unless the smart money sold
early and re-bought at the close.
Last Thursday, we said that
dip-buying was fuel for a decline and that we needed to see some real
fear in at least some of the sentiment data. I also advised that the
prior lows were very much in play, and then around 148500 on the
futures. We got that easily and bounced but it smelled like "an orderly
decline" hand-delivered by "the powers that be" and that the low was
suspect. I thought that we'd get some real gut wrenching sentiment
before the end. My call was for a bounce, a failure, then bounce again.
We got a bounce, a failure, another bounce and yet another failure.
This ought to be generating some serious Bearishness, but it's not.
Now, we ARE seeing some signs of Bearishness, no doubt and we are also
seeing some extreme readings. This says to me that we're near some sort
of a low. No more than 4 days away and probably sooner than that. The
sooner it comes, the more suspect it will likely be. I'm going to give
you a projection, but it will be very fluid and will change based upon
volume and sentiment readings as we progress. I'm thinking that
Friday's late sell off is a set-up. I'll bet that if the powers that be
can manufacture some good news, they will, and that we'll get some sort
of a bounce on Monday. Ideally, it'll gap up well above the futures
close and not look back. This will trap a ton of Bears and leave Bulls
wondering where to get in. The rally won't hold, in all likelihood, and
we'll trade back down, probably taking out the lows. My call will be
for a rally on Monday, down on Tuesday into Wednesday, and some sort of
a rally into Friday. We'll probably fall into the following Wednesday,
but we'll worry about that as we get closer. Play it very nimble, but
it's probably OK to nibble long on weakness.
We do not have a ST Sell Sentiment signal. Since we've been publishing
our ST Sentiment Signals, we've had 48 trades and 36 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.
The Mechanical Senticator model will go long at the open. The
Subjective Senticator Model is already long at 146.45. Stop at 144.00.
Sell at 148.45 or better. Remember, these models must trade in
the direction of the Senticator or not at all.
Portfolio (tracking portfolio):
50% Short SPY at 151.
50% Short SPY at 152.
We're fully short. We may dump or shift 1/2 to the ITW on a bounce.
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
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SENTIMENT AND ANALYSIS
The Fearless Forecaster Sentiment Poll is taken each Friday from a
generally static pool of experienced technical analysts (both private
and professional). The Fearless Forecaster Sentiment is not normally a
good fade, though there are times when it can be.
The Fearless Forecaster sentiment data is useful on the short term; the
Fearless Forecasters tend to be right. Typically they are right sooner
rather than later, if there's a large plurality. On the flip side of
the equation, if 90% or more are Bullish or Bearish, the odds of them
being right over the very short term are huge, but the odds of a major
turn (in the opposite direction) soon thereafter are also quite good.
We have also found that when the Fearless Forecasters are evenly split,
look for a BIG move in either direction, but usually down.
Over the years, we have found a number of other tools to help in
evaluating the Fearless Forecaster Sentiment. We publish this in our
weekly "Institutional Sentiment & Analysis" (a part of our
institutional research). These additional tools are our "Smart Money"
poll, and our Senticator. Both are proprietary polls run by us.
We have found that the Senticator tends to be right by the end of the
week (as much as 82.7% of the time), though it tends to be more
accurate in a rising market than a falling one.
The "Smart Money" pollees are very useful when there is divergent
opinion. It's generally NOT a good idea to fade the "Smart Money"
unless "'EVERYONE'" (all sentiment measures) is in agreement. When in
doubt about the meaning of the Fearless Forecaster Sentiment Poll,
defer to the "Smart Money" poll. The "Smart Money" guys are folks with
whom I've worked or whom I've watched for YEARS. They all have
different approaches and they're all VERY good (not infallible, just
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