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Investor Sentiment: Heading Into the Final Stages
As long as the bulls continue to believe, the market should continue to push higher, but there will be limit. Clearly, the best, most accelerated gains are behind us, and from this point onward, the gains will be harder to come by. Investors should have been buying back here (see article from October 7, 2011) when risks were perceived to be high. Instead, investors are buying now when there is a belief that the market is a sure thing. Sure things and market profits are normally not found in the same sentence. Nonetheless and as stated last week, I would embrace the current bullishness, but be aware that signs of a market top are starting to crop up. For example, the depth and duration of market sell offs has become very brief as investors feel like they are missing out. Or company insiders have increased their selling significantly. The best thing the market can do is sell off and take the "weak hands" out of their positions, but that doesn't seem to be in the cards.
The “Dumb Money” indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. This indicator shows extreme bullishness.
Figure 1. “Dumb Money”/ weekly
Figure 2 is a weekly chart of the SP500 with the InsiderScore “entire market” value in the lower panel. From the InsiderScore weekly report: "Insider selling increased last week as a big wave of insiders saw trading windows open and were free to trade following their companies' earnings announcements. Selling has not reached a level that has triggered any major red flags quantitatively or qualitatively."
Figure 2. InsiderScore “Entire Market” value/ weekly
Figure 3 is a weekly chart of the SP500. The indicator in the lower panel measures all the assets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall. Currently, the value of the indicator is 69.14%. Values less than 50% are associated with market bottoms. Values greater than 58% are associated with market tops.
Figure 3. Rydex Total Bull v. Total Bear/ weekly
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You mean the DOW won't go to 20,000?
AW...SHIT
Markets...
Those are soooooo 2000"s
I can remember when "buy and hold" was seen as an investment strategy!
Seems like a lifetime ago....
Buy & Hold or 'Buy & Hope' to give it its technical term, was never an investment strategy, it was just pure 'hope'
Very toppy.
Think of how many stocks hit all time hights since the New Year.
"What recession ? " says rider as he picks up his government paycheck.
"Carry yourself" says horse as he bucks parasite from saddle.
We have a booming, stable economy in the Western World or we have a dying disaster. Look around. Most activity has the government behind it; printing and borrowing.
When this movie ends, no one will want the credit(s).
Mmmm fundamentals. I would argue that market bottoms are only formed when government intervention causes a change in risk. ie the government backstops risk so in effect there is no risk. We have seen this time and time again over the past few years. Dropping mark to market rules, QE XXX, LTRO, bailouts, ZIRP, etc. Without the government backstops the impressive market rally would not have been possible. The DOW may have dropped a little further, most of the big banks would have gone bust, GM would have failed but by now the market would have ecovered with healthier corporations taking center stage. Instead we got 700 p/e garbage corporations seeing 10,000% gains in three years, massive insider trading, directors treating corporations as piggy banks. Everything that caused 2007-2008 100 fold. The causation of the market drop was never fixed, when that becomes commonly known is when you get your market top. Only to be fixed again by more government intervention. The only winning move is not to play.
I could argue there is no such thing as the market.
There will be no crash for quite a while yet. There is much QEasing that will be keep the balls in the air.
We are on about QE 9. 9 QEs in the last 3 years. The Fiat Ponzi has been leveraged beyond imagination. Thus why the populace is absolutely stunned.
People who even understand the worthlessness of the dollar/euro/fiat even say, "It will go on forever." Well what is limitless is not a lie. Lies end.
Reality is what is limitless. Time and space and such. Not lies. Lies always come crashing home.
This Fiat Ponzi, is one big lie. It is a lie, based on a lie, run about using lies as construct, and when anyone mentions it at all, more lies are heaped on it.
It is a castle made of sand, built on sand. It will be swept into the sea, eventually.
Cleanse your doors of perception, then you will see the world as it truely is.
Right on the mark. AND, for sure, no one will see it coming, but we will all see it leaving.
you will see it coming, it's called a Bank Holiday
Boring world we live in.
Dumb money in the market, massive insider selling, and the technicals have it at a top. Perfect time to slaughter the hogs, right?
Well there is a few problems. How many more times can the market makers sheer the sheep? Pensions need a return matching inflation costs which puts the Dow at around 11,500. Obama also wants to be re-elected so he will ask Bernanke to keep his foot on the QE pedal. Geithner is trying to fund the Ameriponzi and so he is tanking the value of US debt. And last but not least the Europonzi is dying and needs bailout after bailout.
So the Ameriponzi and Europonzi continue shoveling fiat into the furnaces of their Central Banks, the IMF lies in waiting to help fund the world's implosion, and the people of the world beg for their pension crumbs.
Which way will the cookie crumble? It may be a little early to start drinking, but I have two cold ones in the fridge for tonight's Greek Epic.
Agreed
..except i don't think the IMF are lying in wait for anything... like the UN the IMF are redundent on a scrap-heap somwhere mid-Atlantic twiddling their thumbs subservient to national interests.
Christine Lagarde had more power/action at the French Finance Ministry than she does at the IMF (which is a relief because she's crap)
Fair enough. How about we revise it to
Black–Scholes
http://en.wikipedia.org/wiki/Black–Scholes
Party Time. Let the fucking crash happen already.
And Nash' equilibrium?