Hambone@measuring sentiment -- trotsky, 13:39:31 08/11/06 Fri
we've talked about this before, on the old kitco forum. to me, quantitative measures are more important than anecdotal ones, for the obvious reason that they measure actual money bets as opposed to opinions.
even so, anecdotal sentiment has its place as well...but i don't detect a surfeit of bullishness on message boards either (to the extent that i look at them). there's a lot of doubt, and for every bull you find at least one person calling for a correction (or expressing happiness to be out of the market whenever we have a down day).
considering that the sector has essentially moved sideways over the past few weeks this is more or less normal.
regarding long term bullishness, since the long term trend has been up to date, there's no reason to abandon it. should the long term uptrend be broken at some point in the future, then there would be good reason to revise that stance, but not before.
Hambone@sentiment -- trotsky, 12:44:53 08/11/06 Fri
well, that's why i made the point that in the gold sector, sentiment is actually CONTRARY to the prevailing short term trend at the moment. and it is so in an extreme manner - it's not normal to see fewer bulls NOW than at the 2005 low, at the end of an 17-month long cyclical bear market , when gold and gold stocks are in fact at a pretty high level.
meanwhile, in the broader market, this excessive bearish sentiment is at odds with the size of the actual downturn, which was minuscule - not even a 10% correction.
the comparison with the bullish sentiment extremes seen at the tail end of the biggest market mania of all time - after the market had gone up for nearly 26 years - is not really applicable imo.
sentiment must always be put into context - i see no clear trend anywhere that justifies such sentiment extremes. even if there WERE a clear down trend, i would probably call for an imminent bounce in view of such lopsided sentiment.
Hambone@general market sentiment -- trotsky, 12:13:17 08/11/06 Fri
there are also too many bears. for instance, the cash flow ratio of all Rydex bear funds combined plus the implied money market cash flows stand close to a record high. the CBOE put/call ratio 10-dma actually hit an all time high in the May-June correction. lastly, the AAII poll has recorded more bears than bulls for 13 consecutive weeks.
now, the market has been weak, so a certain amount of bearishness should be expected. however, the technical damage of the correction was no different from that seen in previous corrections since the March '03 low. compared to THAT, this amount of bearishness is excessive. |
