This page has been archived and commenting is disabled.
This Is For All You Bull Market Geniuses
This article is for all those bull market geniuses, who buy the hype and who have been fooled into believing, yet again, that "this time is different".
Figure 1 is the "Dumb Money" indicator. This is the same indicator I show every weekend in our report on investor sentiment; the indicator will be updated this weekend. The "Dumb Money" indicator looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio.
Figure 1. "Dumb Money" indicator/ weekly
######
Since March, 2009, the "Dumb Money" indicator has been bullish to an extreme degree on 3 separate occasions, and typically, these are bearish signals suggesting that a price move is either nearing its end or the ascent of prices is surely to show. This is our expectation 85% of the time. In figure 1, this would be when the indicator is red in color. For months on end, I have heard from those investors (i.e., bull market geniuses) who categorically and emphatically stated that this stuff doesn't work anymore. Of course, none of these bull market geniuses knew what was working either or bothered to offer alternatives or insight. But suffice it to say, a bull market covers up a lot of bad analysis. Anyway, because I deal in numbers and those bull market geniuses don't, I thought we would look at the 3 instances since March, 2009 where the "Dumb Money" indicator was extremely bullish (i.e., bear signal) and see how things turned out. The first time the "Dumb Money" indicator was in the extreme zone showing too many bulls was on May 8, 2009. This lasted until July 10, 2009. The return for the S&P500 over that period was a NEGATIVE 5.39%. The second instance was from July 31, 2009 to February 2, 2010. During this 29 weeks of bull market hype and other nonsense, the S&P500 gained a POSITIVE 8.91%. The last instance started on March 12, 2010 and the indicator still remains in the extreme bullish zone. As of Friday morning, that signal has returned a NEGATIVE 3.5%. So let's assume that as a bull market genius, who bought the hype, you are so smart that you bought and sold the S&P500 only during those times when the indicator was in the extreme bullish zone (i.e., bear signal). In other words over the last 14 months, you were only long the market when the indicator in figure 1 was red in color. Now let's do a little math and add up the returns over those 3 periods, and we get a total return of 0%. Nada, nothing, zip!! Since the March, 2009 lows, 61 weeks of time have passed. The 3 periods highlighted above in our little study account for 48 weeks of that time. The gains from March 13, 2009 to the present (Friday morning) are about 48%. The 48 weeks where investor sentiment was extremely bullish as determined by the "Dumb Money" indicator did not contribute at all to those gains - nothing. So for all you bull market geniuses out there, you have earned exactly what you deserve --nothing! ******
Improve your market timing. TheTechnicalTake now offers Premium Content on a daily basis for a nominal yearly fee. This unique data set will show you which way investors (i.e., bull market geniuses) are leaning. It is independent and original market analysis. To view a recent report click: REPORT.
To subscribe, please click: SUBSCRIBE.
»
- advertisements -
New post this weekend. Hope u enjoy.
Have a good weekend.
http://midasfinancialmarkets.blogspot.com/2010/05/weekend-up-bear-is-bac...
For all the "innovation" it's still the same game it was 100 years ago: accumulation (at wholesale)/distribution (at retail).
Now, who are the wholesalers and who are the retail customers?
HAVE A FRACTAL TRADING DAY!:
http://williambanzai7.blogspot.com/2010/05/have-fractal-trading-day.html
This was posted on May 1st - a week before the crash.
'11,250 / 300 is an area of significant resistance and if this level can’t be breached it should signal the end of the March 2009 bear market rally - the weekly DOW chart shows an expanding wedge indicating a significant move is probable - this remains an overbought bear market rally and the uptrend could falter at any time - the VIX index continues to give bullish warnings which is bearish for equities - long term charts of key equity indexes continue to give bearish warnings and the March 2009 lows will be breached in my opinion - USD Index bullish warnings since 2009 on the weekly and monthly chart have not changed and further USD strength and thus EURO weakness is still expected '
http://www.zerohedge.com/forum/latest-market-outlook-0
http://stockmarket618.wordpress.com
But I think it stems from a fairly simple and somewhat understandable error.
called a brain fog , and absolutely no understanding of the debt component .
an error of judgement , an error of economic forces, an error of the zit crowd lapping at the gruel of the pavlovian , complex world of orwell
Here's my take. About 80% of the runup was based on government-infused liquidity. It gave the banks free money to trade with, it spiked auto and home sales, it increased various Obama-favored subsidies, etc. You knew all that, and probably, somewhere in the back of their minds, so do the bulls. Then at some point, say around first of the year, the economic data started getting a little better than they were. Not great, mind you, and not universally good. But better than they were. We bears tend to view those data points as all BS, but they're not. Things probably ARE getting better -- but the essential point is better than what. The reality is that they're getting better than abysmal, so that on a scale of 1 to 10, things are now a 2 or 3 rather than a 1. But the mistake the bulls make is to view things in the context of the stock market, which has rebounded much more than the economy as a whole. So they're seeing the economic data getting better (and surely not viewing it with the cynicism we are), and viewing it through the lens of the much-improved market, they figure that things are already 6 or 7 on the 10-scale and now things are only going to get better.
Realistically, it's a huge mistake. But I think it stems from a fairly simple and somewhat understandable error.
Harry is not only cleaning out his shorts from yesterday but from Friday's market action as well.
By the end of next week, I expect Harry to declare bankruptcy...liquidation, naturally!
ttt, you sound rather bitter in your vindication of your analysis. Conventional tech & sentiment analysis both failed in current market conditions. Smart money followed the trend, made a reasoned judgement as to turning points & exited with the blow off top.
Sentimental analysis just does not add enough value to be useful. It suffers from the same problem as conventional tech analysis; i.e., too many are using it & consequently it suffers the same fate as a coin flip. Everyone is just trying to outsmart the next guy & end up outsmarting themselves in the counter intuitive quagmire.
If the dumb money just blindly followed the trend with a simple trend following system, they would have done well in the current market, booked profits & reinvested in gold & silver to protect them.
So, take a deep breath, relax & have a Great Weekend to enjoy your victory!
Aye, totally agree. Although I appreciate sentiment analysis...is a bit tricky. I stick to trendlines. They work.
Lionhead:
Not bitter at all....nor is it vindication.....it makes for good copy; but I manage money and know that I am only as good as my next trade...so I take pleasure in my "victories" and go onto the next battle....with trading there are always issues and rarely do outcomes ever come out perfect....but I take more pleasure in many ways adhering to a discipline then making gobs of money
thanks for the good words, however
Is there any truth to the rumor that harry wanker changed his name to Harry Vagina after getting his balls eviscerated these past few days "buying those dips"? I'm just askin'. :)
lulz, phantom.
LOL, + 1000
The only dips I like right now are French onion and chipotle flavored.
Oh, and HarryWanger of course, the biggest dip of all. RIP.
dumb money fiat
smart money gold
Totally Awesome! What better way to celebrate your vindication by watching it unfold before your eyes.
http://www.breitbart.tv/stock-market-webinar-leader-goes-nuts-during-the...
Who was running the Webinar? Sounded like Captain Beefheart...
Strange Harry has not been around. I would think this would be the time to exclaim, "all is well. . . ", like the line of "analysts" they had on Bloomberg after the May 6 crash and burn session. . . one after another . . "all is well, and sound".
He probably admitted himself to the nearest psych ward on Thursday.
You people are soooooo stooooopid. Just look at your keyboard. Do you see how close the B and the M keys are to each other?
Being off by 999,000,000 shares is not some conspiracy. You pretend like this is some act of God and not someone doing God's work. Or wait? Do I have that backwards?
Geeez! Buy solar and retail.
duplicate
Try #2:
In all fairness to the Wankster, if he religiously moved his stops over
the past 14 months, he made some coin.
Now he has no entry points.
Oh, I got the job report from Wall Stree J. that US added 290000 jobs while Unemployment Rate hiked to 9.9%, what the f*&king logic here? I think I need to go back Grade 1 Math class for a while. They also talk about MGM ask creditors come back July, now I decide to enjoy "Tom&Jerry" this weekend.
*You* are precisely the reason main street avoids Wall Street.
No company owners in your world - those are the saps. Only "smarter than the average bears" pushing and shoving to get in and out. Hmmm...wonder what your momma thinks......
Dumb money - but I'll outlive you.
Company owners???? Oh The ones who cook the books, pay themselves disproportionately and sell into the bull phases since they know the real state of the accounts...Oh I'm glad you handle that kind of stuff.
I'll stick to numbers I CAN verify by myself.
Where's the Wankster?
MB, Yipper and the Wankster must be colluderating...
Ah, The Three Mistakeneers. They are off tilting at windmills.
They'll be back when they encounter a green shoot.
(My apologies to Dumas and Cervantes.)
And my apologies to the dum asses, yipper and wankster, as we shouldn't make fun of the mentally handicapped. Although they can be fun to watch!
His other trustafarian friends reported seeing the paramedics taking him out from his department. He will be back as soon as the market has his first incipient bounce.
Harry, Mr. Teeth, here's a song for you my man.
Bulls On Parade - Rage Against the Machine
http://www.youtube.com/watch?v=-58-36lSqG4&feature=related
+1
Tyler, Reggie is the man. Meanwhile CNBC analists have a party this weekend with a lot of 'Liquidity" of course. Now we know GS with Abacus, MS with Platium, JPM with silver, C with HFT, Fed with Dollar. What else for BAC and WFC?
"What else for BAC and WFC?"
Plain Old Mortgage Fraud
And HUMP-ing HAMP and HARP... the Obummer backdoor bank-ster bailout welfare programs...
Where's the "HarryWanker" indicator line?
Harry, got a good deal on Depends for you---contact me.
Having gone into total seclusion this week, if that HW SOB shows back up on the next bounce, I won't be responsible for anything I write towards him.
Where is "better than expected" job report, CNBC folks?
do you really think there are any cnbc folk on here? can cnbc folk even read intelligently?
"do you really think there are any cnbc folk on here?"
Not Now
Since Tyler got rid of all the unregistered anonymous anony zombies that would show up by the dozens in a post like a "Night of the Living Dead" brains feeding frenzy.
I am sure Dennis "dickweed" Kneale among others were monitoring sites that made sooo much fun of his dumb ass for sooo long...
The "dickweed" had an obsession about financial blogs. One does not develop that unless one is personally monitoring...
I agree that Cramer the Clown is far to self absorbed to read anything other than his own writings...