Some sentiment data from an excerpt of my newsletter last weekend.
Excerpt from David Korn's Stock Market Commentary, Interpretation of Moneytalk, Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service.
September 7-8, 2002 Special Alert Weekend Edition
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Sentiment
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Concurrent with the relentless decline in stock prices, investor sentiment historically becomes more pessimistic. Expect investor sentiment to continue to deteriorate if the market plunges further. This paradox explains why investor sentiment serves as such a good contrarian indicator relative to stock market timing.
The Hulbert Stock Sentiment Index (HSSI) is still giving off too bulish a reading to suggest to Mark Hulbert that a bottom is in place. The HSSI measures the average exposure to the equity markets among investment advisory newsletters tracked by Hulbert Financial Digest, and is one of the sentiment indicators that I follow. Read Mark Hulbert's latest analyst of the HSSI at the following link:
cbs.marketwatch.com
There was a substantial increase in bulls and decrease in bears according to the latest numbers from the Investors Intelligence survey. According to the survey, 43.3% of those investment newsletter writers polled were bullish, and 33% polled were bearish. (The remaining 23.7% are basically bullish but calling for a correction or short-term weakness). Using the formula, [(bulls)/(bulls + bears)], the percentage comes to 56.75%. The four week moving average stands at 53.63 -- almost 10% higher than a few weeks back, but around the same level in the week immediately following the terrorist attacks last year.
The American Association of Individual Investors poll also saw some converts to the bullish side. According to those polled, 31.5% of those pulled were bullish, 50% were bearish and 18.5% were neutral. Using the formula, [(bulls)/(bulls + bears)], the percentage comes to 38.65%, with the four week average at 50.48%.
The Market Vane survey of advisors is now 33% bullish compared to 34% last week.
The CBOE put/call ratio's 10-day moving average has stayed stubbornly below the 1.0 level, and is currently at .86. The VIX is fairing a little better as it managed to close above the magic level of 40 on Friday at 40.04 which is a bullish sign. Its 10-day moving average stands at 37.23.
Tuesday's action, in particular, witnessed an incredible amount of negative market internal readings. I read an interesting article on CBSMarketwatch.com which reported that Tuesday qualified as a so-called "90 percent downside day" which according to Paul Dresmond, indicates that the worst in the stock market "is far from over." Dresmond pointed out that 92.2 percent of the total volume on the NYSE was negative with total points lost among stocks that treaded reaching 94.2%. To him, this suggests that the July lows are merely just the beginnings of a panic and that we are headed for significant new lows. Desmond believes that you typically have 5 of these so-called "90 percent downside days" before you get a bear market bottom. How many of these days have we had in the NYSE over this bear market? Counting Tuesday, only 2 -- the other being in April, 2001. Dresmond also expects to see a few of these such days in the Nasdaq Composite as well before it bottoms. If there is any silver lining, its that Desmond believes that these panic down days are usually followed by "snap back rallies lasting from two to seven days." Read more about his Dresmond's methodology and what he has to say to CBSMarketwatch reporter, Thom Calandra, at this link:
cbs.marketwatch.com{01032F56-C110-4178-B37E-509384671A97}&siteid=yhoo
Now, one person's poison, is another person's pleasure. The dramatic selling on Tuesday caused a spike in the Trader's Index (TRIN) which closed the session on Tuesday at 3.69. This is the highest reading since April 14, 2000 when the TRIN closed at 4.31. You may recall that in April, 2000, the high degree of bearish sentiment spurred a significant counter-trend rally. I crunched the numbers and the TRIN's 10-day moving average is up to 1.69 with the 50-day moving average now at 1.37. The high reading in the TRIN produced a bullish signal according to Frederic Ruffy of Optionetics.com. Check out reasoning behind their bullish signal last week at the following link:
optionetics.com
For more information, visit my website:
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