skinowski, (this is my last post of the day),
You wrote:
Your FF's in a very short time frame appear to be "smart money", a non-contrarian indicator. Question - Can they be of help in a time frame from several hours to several days?
The opinion poll isn't much use beyond a day. The Actual Position Polls, however, are more useful over longer-term duration. Take a peek at the archives, if you want to spot check. I actually have historical data, but I need to compile and chart it. I'll try to get into that next week. Time...yikes...
And another question, if you don't mind: There appears to be another well established "non-contrarian" group, namely, the OEX options traders. Does your approach offer an advantage over them?
Perhaps there is some misunderstanding regarding my approach. I look at everything, including the OEX P/C (and I agree, it's pretty good as a non-contrarian indicator), and the $-weighted OEX P/C. IMO, you get more signals from the FF's but I'd say that it's not good enough on it's own, it's just an interesting additional bit...another piece of the equation.
To give you an idea of what I look at, here's today's sentiment letter, I hope it helps... I'll catch you tomorrow.
ISA Daily Trade Navigator for 12/15/05
Thursday morning at 9:15 am
(NOTE: The message board password is *******.)
Short-Term Sentiment:
Bearish.
Intermediate-Term Sentiment:
Neutral. Leaning Bearish.
Longer-term Trend: Positive.
Intermediate-term Trend:
Positive.
Short-term (one-day) Signal:
Weak Sell. Scalp only. We'll advise ST Signal subscribers of our entry, if we get one. (Last signal, "Short but keep positions small" 12-14).
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.
Message Board Sentiment
The message board sentiment poll shows Bulls at 51% and Bears at 24%. This as Bullish since these pollees are right more often than not, BUT, this is pretty excessive. The Actual Position Poll shows 59% at least partially long, and 24% at least partially short. There are just 13.79% fully short Bears. This is well below my 20% threshold. The large number of long Bulls is reason for caution, strong season notwithstanding. Any sell off is likely to be muted, but the odds of such are fairly high--unless op-ex halts it.
Options Sentiment
The equity P/C ratio rose to a still neutral 0.59. The OEX PC ratio rose to a neutral 0.83. The OEX $-weighted Put/Call data from Hamzei Analytics came in at a still Bearish 0.46. Expiration makes that harder to interpret, but I'm not liking it. The QQQQ $-Weighted P/C ratio came in at a more Bearish 0.48. The 10-day P/C ratio is at a neutral 0.79. The daily P/C ratio is at a modestly Bearish 0.69. ISEE came in with another Bearish reading of 227. This indicator is contrarian; over 200 is too optimistic, under 100 too pessimistic. I'm concerned about the OEX $-weighed P/C ratio and the ISEE. One day is a fluke but two days suggests real over-optimism. Thanks to expiration, we may not see much selling for a bit, but we still ought to look for some.
General Public Polls
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 $17MM of inflows, while the Dynamic Bear Funds had outflows of $3MM. Overall, the fund shifts were very mixed, probably due to the decline in the Nasdaq. The RSO showed a modest Bullish shift on a nicely higher day. That's what we'd expect in a mixed market. If we do decline today or Friday, it shouldn't be too bad unless we take out yesterday's lows. Despite the sentiment, it's hard to get much going during expiration 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. Regardless, "Sell territory" is meaningless without trend and breadth confirmation. The market can easily rally much more for much longer, especially at this time of year.
Conclusion
The Senticator is Neutral to Bearish, which isn't a lot to work with, but it does suggest continued caution. This is bolstered by the excessive Bullishness in our position poll and the overly Bullish readings from ISEE and the $-weighted P/C ratio. Normally, I'd be pretty Bearish, but unless somethign happens to really mess up the options boy's plans, we ought to hold together today if not push higher. All is basically OK above Wednesday's lows. Watch out below that level. I'm inclined to nibble long on any weakness and add to it if we see more next week.
Yesterday, we had a ST Sell and gave it a shot, but closed the position out at the close for a 0.25 loss. Last week, we got two dandy ST Sentiment Signals, nailing down 6.75 and 9.25 emini points respectively on two day trades. 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 sit flat unless we get some change in sentiment during the week. The Subjective model is 1/2 short at 126.75. Cover at 127.25, and call it good.
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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.
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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.
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Note that we are also publishing on our private area on Traders-talk, too, for those who want on-line access to our charts and research (note that this is a corrected link).
traders-talk.com
(you'll need to register and sign in on Traders-talk and you'll need an additional password to access the board. If you are a subscriber and you do not have a password, please contact me).
For more on using the ISA and the various sentiment poll data, click here:
wallstreetsentiment.com
Mark Young
Editor |
