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Bearish Enough To Buy? The Real Fear Index Says Not So Fast

Tyler Durden's picture




 

All day long we are bombarded with surveys of sentiment. When positive; all is well. When negative they are used by any and every long-only manager as yet another money-on-the-sideline-like as justification to be the contrarian and buy-the-dip. There are however many times when the survey of people's 'views' is quite different from their positioning (cognitive dissonance aside) and we prefer to look at real market sentiment indications for our signals. Case in point is CSFB's Fear Index - which, unlike VIX, measures the sentiment skew in options prices (how much more bearish or bullish put options are relative to call options).

CSFB Fear Index vs S&P 500...

In general, it shows a slight leading indication for larger-trend equity movements but most critically - it can signal when real market positions have become too bullish (or overly confident) or too bearish (overly conservative).  

The fact is that the options markets are NOT currently overly bearish here - as they were in Q4 (green oval) - providing the short-squeeze-levered ammo for a rally here; just as options markets were overly bullish (red oval) as the end of LTRO2 began - which provided the initial levered-long-squeeze ammo for the current sell-off.  

So the next time you hear someone saying how negative sentiment is - and that's a reason to buy - show them this chart (of real positions - not a survey!) and tell them to move along.

The bottom line is that options prices (or real market sentiment) are in sync with equity prices here and show neither extreme bullish or bearishness.

Chart: Bloomberg

 

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Tue, 07/10/2012 - 17:03 | 2603550 francis_sawyer
francis_sawyer's picture

Who the fuck buys stocks anymore? (thank you Bernanke)...

Tue, 07/10/2012 - 17:10 | 2603576 Rainman
Rainman's picture

yah, to hell with all these charts. Bernank & his associated hoodlums are the ones to watch.

Tue, 07/10/2012 - 17:17 | 2603591 Conman
Conman's picture

I'd tend to agree, the only thing that matters is QE. Which is amazing since the Fed gave us Twist extension, but that wasn't the right QE i guess? Lol we really am in bizzaro world, we am.

Tue, 07/10/2012 - 17:38 | 2603662 Rainman
Rainman's picture

Here's some more bizzaro..... Fed's known about the Libor scamming for the past 5 years

 

http://www.reuters.com/article/2012/07/10/us-markets-credit-barclays-idUSBRE86907120120710

 

Tue, 07/10/2012 - 17:14 | 2603582 Mark123
Mark123's picture

Only those that have to....pension funds, insurance companies, mutual funds etc.  And they will all be crushed.

Tue, 07/10/2012 - 17:26 | 2603619 francis_sawyer
francis_sawyer's picture

Never a greater truth (lie) was ever told... U kno what?... FUK EM ~ they'll all get what they deserve for living a lie...

Tue, 07/10/2012 - 17:18 | 2603593 Stock Tips Inve...
Stock Tips Investment's picture

The market is showing signs of weakness and fell again today. Some important technical indicators like MACD and Stochastics are showing a decline. Most likely the market will continue falling.

Tue, 07/10/2012 - 17:23 | 2603607 LawsofPhysics
LawsofPhysics's picture

Where is this "market" you speak of?  This bullshit above is more akin to tracking the habits of gamblers in a casino with The Fed giving the ocassion pump, just to keep everyone addicted to the game. There is no fucking market.

Tue, 07/10/2012 - 17:28 | 2603624 francis_sawyer
francis_sawyer's picture

I kno right?... Another paper pushing 'TA' dipshit...

Tue, 07/10/2012 - 19:44 | 2604071 fourchan
fourchan's picture

may as well call the market hft land, with the ocaisional sucker thrown in.

Tue, 07/10/2012 - 17:23 | 2603606 eclectic syncretist
eclectic syncretist's picture

Keep your eyes peeled for gold and silver decoupling.  A watershed moment is somewhere out there for PM, and it's getting closer.  Anticipation of another round of QE, perhaps a really big one this time, will likely be what sends PM's higher this time, and the return will outdo equities and bonds.

Tue, 07/10/2012 - 17:30 | 2603629 francis_sawyer
francis_sawyer's picture

Jesus Herman Christ...

Where the FUCK did all these technical paper jockeys come from all of a sudden?...

Tue, 07/10/2012 - 17:31 | 2603634 Hype Alert
Hype Alert's picture

So basically, the only people that know what the FED is going to do are the board of directors who happen to be members of the banking cartel, who then bet against their clients.

And who grants power to the FED?  Congress.

Tue, 07/10/2012 - 17:36 | 2603651 Meesohaawnee
Meesohaawnee's picture

id have to say anyone using technical analysis to this joke is kinda detached from reality. Means nothing. Take your MACD's PEs BETAs and stick em in your pocket. Leave that for the clowns on the booboo cartoon  channel to let you think this is a game anymore.  Only thing that matters is Ben. Period.

Tue, 07/10/2012 - 17:44 | 2603682 q99x2
q99x2's picture

Looks like we are still waiting for the necessary plunge required for QE3. It went down nicely after a similar performance last time.

Tue, 07/10/2012 - 17:54 | 2603697 ATG
ATG's picture

Covered our SPY Jul 136 puts today with +28% profits.

Bot SPY Jul 134 calls toward the close:

http://richcash8tradeblog.blogspot.com/

Tue, 07/10/2012 - 18:57 | 2603922 I should be working
I should be working's picture

At least there's someone in the market who's still long, but why today?  Wait for 1300 at least...

Tue, 07/10/2012 - 22:49 | 2604600 The Monkey
The Monkey's picture

Not all earnings "surprises" will be negative. Headline sentiment is bearish. Google and Apple are up on the 19th and 24th. Spanish auctions are going better than they could be. Jawboning will move the market again.

Might as well close shorts on Cummins. We're barely into the earnings season with lots of bulls ready to charge if and when they see blood. Crappy earnings and guidance is EXPECTED.

Market is not ready to tank hard. We're in earnings season. The Fed looms.

Bullish.

Wed, 07/11/2012 - 00:26 | 2604899 Wave-Tech
Wave-Tech's picture

Some notes on APPLE along with an update on Facebook

http://www.safehaven.com/article/26136/facebook-update-and-notes-on-apple

Wed, 07/11/2012 - 07:39 | 2605309 dexter bland
dexter bland's picture

Headline sentiment is bearish?

Have to agree with Tyler on this one. The market is currently off 5.8% after a run of 113%, yet any time someone suggests we may be due a slight correction there is howling about extreme bearish sentiment.

Everyone is now a contrarian (especially those who missed the 2009 lows), all watching their own sentiment indicators, and  each other for even the slightest bias in position. Perhaps your call of "bullish", will be sucked up by some hedge fund's sentiment harvesting web-bot, resulting in a sell-off, which will inevitably draw out cries of overly bearish tomorrow.

That's just the sort of market we are in, its in a range. Sentiment is near useless except at extremes, and then the hard part is separating yourself from the pack, because  - face it - you're crapping yourself too.

 

Tue, 07/10/2012 - 18:43 | 2603872 zerotohero
zerotohero's picture

If I see one more arrogant asshole in an expensive suit and tie saying what a great time it is to buy stocks I am going to shit in a kfc bucket and send it to Wall St.

Tue, 07/10/2012 - 22:54 | 2604625 The Monkey
The Monkey's picture

Agreed. Even many of the bulls know this market is on borrowed time. Even so, I wouldn't get too bearish just yet.

Tue, 07/10/2012 - 18:58 | 2603924 orangegeek
orangegeek's picture

What a collosal mess.  This next leg down is going to be bad.  Social mood out there is ugly.

Tue, 07/10/2012 - 19:53 | 2604096 azzhatter
azzhatter's picture

and getting worse daily. Ugliness is right around the corner

Tue, 07/10/2012 - 20:20 | 2604148 ZeroAvatar
ZeroAvatar's picture

(Voice of Maxwell Smart)  "IIIIIII, wouldn't DO that if I were you, 99!

Tue, 07/10/2012 - 22:08 | 2604418 mirac
mirac's picture

Cool chart

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