Looks like my caution is now being rewarded.
Message 21979778
Below is the Weekly letter. We won't publishing again until next week, though I'm still watching things closely.
If you want to check out the thoughts of other analysists for free in the interrim (no registration), here's the link to the Market Analysis Board:
traders-talk.com
Here's my weekly letter. I provide a road map, obviously subject to review. Take that part with a grain of salt. Enjoy. I'm not going to be by much this week, so if you have a question of a more immediate nature, send it to me at myoung at equityguardian dot com. Otherwise, enjoy the holiday.
Institutional Sentiment & Analysis Weekly 12/18/05
Published Sunday 12/18/2005
NOTE: We will be taking the week of 12/19 off to spend some time with family. We will advise of any major changes, but otherwise we will resume publishing 12/27/2005. If we move our accounts long, we'll let you know.
Short-Term Sentiment:
Bearish.
Intermediate-Term Sentiment:
Neutral. Leaning Bearish.
Longer-term Trend: Positive.
Intermediate-term Trend:
Positive.
Short-term (one-day) Signal:
Sell. We should pass, but I may try it anyway. We'll advise ST Signal subscribers of our entry, if we get one. (Last signal, "Sell" 12-15--but we passed--no set up).
We are trading these signals intra-day with KTT subscribers on Yahoo IM--contact us for details.
Ideal ETF Portfolio (tracking portfolio):
100% Money Market
Buy 1/2 SPY at 125.70 or better and watch for an alert if QQQQ is down.
Results of the Wall Street Sentiment Survey (formerly known as the Fearless Forecaster Sentiment) taken after the close on 12/16/05
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 (neutral)?"
Weekly BULLS: 32%
Weekly BEARS: 52%
Our `Smart Money' Pollees are as Bullish as they are Neutral and not at all Bearish.
The Senticator is Bullish.
Last time, I said that we would look for weakness into Wednesday and then a rally into week's end. I was playing the odds, so of course, the market did just the opposite and went up into Wednesday and then down. We were thinking long all week though we are advising caution until we saw something that looked like a completed correction, so we get a little bit of credit for keeping folks out of trouble, but not much. I think we have to take a C for that one. At least we're pretty sure no one got hurt on that call nor missed a particularly big move.
[chart omitted]
Last week, the Mechanical model sat flat and the Subjective model The Subjective model was 1/2 short at 126.75 and covered at 127.25. We were stretching pretty hard for that one and closed it early rather than fight the trend for too long. A small loss on a small position..
Proprietary Surveys
This week, the WSS Surveyees are leaning Bearish, while the "Smart Money" guys are leaning Bullish, but are also still heavily neutral. Our "amateur" survey of (more emotional) traders shows 40% Bulls and 60% Bears. The Senticator is Bullish. The total read leaves me thinking that we have a bit more selling next week, that it won't last long. Seasonally, we need to lean long as soon as the pessimism rises some more.
Message Board Sentiment
The message board sentiment poll shows Bulls at 14% and Bears at 66%. These pollees are right more often than not, but this is an excessive reading. I'm not sure that I've seen that many Bears. That's a big plus for the Bulls. The Actual Position Poll shows 30% at least partially long, and 52% at least partially short. There are 21.74% fully short Bears. This is back above my 20% threshold. This is a big turn around from what we've been seeing all week. The large number of short Bears in a market that is just a bit off it's highs is very Bullish. We may have some weakness coming, but it shouldn't last.
Options Sentiment
The equity P/C ratio rose to a more neutral 0.54. The OEX PC ratio remains at a still bearish 1.55. The OEX $-weighted Put/Call data from Hamzei Analytics rose to a constructive Bearish 1.10. Expiration makes this data harder to interpret, but I'm seeing a little for everyone to like. The QQQQ $-Weighted P/C ratio came in at a much more constructive 1.05. The prior low reading, however, may yet have an effect on the Q's for a day or two. The 10-day P/C ratio is at a neutral 0.75, but this measure is getting closer to sell territory. The daily P/C ratio is at a neutral 0.82. ISEE came in with a much better 186, but remember we were above 200 most of the week. This indicator is contrarian; over 200 is too optimistic, under 100 too pessimistic. Obviously, expiration has had an effect on all these numbers, but my take away is that we're quickly seeing more pessimism and that's generally good news.
General Public Polls
Last week, Investors Intelligence reported a rise to 58.8% (vs. 56.2%) Bulls, and a drop to 21.6% (vs. 21.9%) Bears. This is still showing plenty (and growing) of Bullishness, but this is likely early. AAII reported 46.15% (vs. 49.47%) Bulls and 22.12% (vs. 18.95%) Bears. This is still showing way too few Bears and probably implies more weakness near term. Bigger picture, better declines come out of the improved sentiment readings that follow excessive Bullish readings. We have time yet, I think, but be alert. LowRisk reported 43% Bulls down from 46% Bulls and 38% Bears up from 33% Bears. This is just a bit less Bullish and more Bearish than last week and that's much needed. We're almost back to a constructive zone. LowRisk has corrected that earlier crazy reading of 79% Bulls and 0% Bears to 57% Bulls and 21% Bears, which is still excessive, but nothing near as outlandish as the prior reading. We can look for some lower prices, however until this improves some more.
Rydex Sentiment
The Rydex Dynamic Bull funds saw $19MM of inflows, while the Dynamic Bear Funds had outflows of $2MM. Overall, the fund shifts were actually rather Bearish, with the only Bullish shifts into Velocity and out of Venture. The RSO showed a modest Bearish shift on a rather negative day. That's technically a weak Sell, but again with most of the shifts being Bearish, I'd not get too Beared up. On Friday morning, I said that if we were to decline after the gap up, it shouldn't be too bad unless we take out Thursday's lows. We didn't until after the close which took the futures and the SPYders down. There's likely to be some more selling, but the Bearish shifts imply that the market will find its feet quickly this week. Bigger picture, we're technically in Sell territory provided we turn the trend. It's imperative to remember that we've only reversed about 2/3 the bearish shifts we saw going into the low, and it's likely that all of the Bearish shifts will be reversed prior to a good top.
[chart omitted]
Conclusion
The Senticator is Bullish, which is what we want to see if we can get a little weakness this week. Between the generally positive seasonality and the Senticator, any weakness is a buy set-up. The Message Board sentiment, after showing way too much Bullishness all week, has quickly shifted Bearish, too. Rydex saw a lot of Bearish asset shifts too, save in Venture and Velocity. ISEE too improved quite a bit. The prior outlandishly Bullish readings are likely to weigh on the market after that late break down. I'd definitely be open to some selling this week, but I think we just have to allow seasonality and the optimism of the season to trump the sentiment and even the recent negative breadth. We've a simply learned that picking a top at this time of year is frustrating. Better to scalp long or look to buy weakness. My call for the week is down Monday, up on Tuesday and down at least part of Wednesday, and up thereafter. There are a lot of cross currents affecting this market, so I'd not expect any move to get too far out of hand. Friday ought to be pretty dead. No matte when it comes, any weakness that looks dramatic should be bought.
[chart omitted]
Last week, we got three ST Sentiment Signals, but only managed to get short once and taking a small 0.25 loss. We can't complain too much. We'll be watching for a possible buy next week and if the set up is good, despite our vacation, we'll advise you of it. If you are interested in our ST Sentiment Signals and would like to receive these day trades and instructions via both email and Yahoo Instant Messenger (with specific trade set ups, ongoing entry, stop, and exit points), please contact us with your yahoo ID. There is a $39.99/month surcharge for this service.
The Mechanical model will go long at the open on a limit of 126.42. The Subjective model will try a 1/2 long on a limit of at 125.81. Double up at 125.06.
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Ideal ETF Portfolio (tracking portfolio):
100% Money Market
If the market trades down hard this week, we'll nibble long
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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 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. |
