Market Indicators - Investor Sentiment

» bob90245 - Re: Re: Re: Housing Market Ills

Bolton, your explanation is one I've heard before. However, the author's context is about SELLING homes -- not refinancing home loans. I think it can be argued that the refi boom is long in the tooth and will encounter head winds with potential rising rates.

Regarding the housing bubble . . .
That's been a topic for more than a year. The author's statistics seem to indicate that the bursting may have begun:

year-over-year, the price of virtually everything on a per-square-foot basis is up. But now, so are :

The number of days that properties sit on the market.

The number of properties for sale.

-- posted by bob90245

» Normxxx - Re: Re: Re: Re: Housing Market Ills

Bolton's got it right; it's the use of an appreciating house as a kind of ATM machine where no deposits of cash are necessary. Fleckenstein has been yelling about it for at least the last couple of years and, now he is saying the ATM function has stopped— because housing appreciation has stopped— so can a housing price death spiral be far behind!?!

-- posted by Normxxx

» SteveT - October 14, 2005 Sentiment

AAII it seems is always more volatile and the past three weeks is no exception. The current data shows 61% out of the market up from 50% last week.

Put/Call ratio is showing a fairly high level of fear, also another sign of a bottom could be in.

I am using the VTO report for the II data. http://vtoreport.com/sentiment/sentiment...
Note for clarification historic sentiment tables are for that current week and not the four-week moving average.

Investors Intelligence Bulls 45.8% Bears 29.2% Correction 25%
45.8/(45.8+29.2) = 61.07%
Four Week Average = 65.02%

A few historic dates: 7-20-98 68.42% 10-12-98 47.41% 4-3-00 67.79% 1-1-01 64.10% 4-4-01 58.91% 9-17-01 52.0% 9-21-01 48.7% 7-19-02 47.2% 7-23-02 47.2% 10-9-02 50.0%

Sideline Money Bears + Correction =54.2%
Four Week Average = 49.3%
hairie has researched some fascinating numbers for all time high bulls readings going back to 1965. http://www.suite101.com/discussion.cfm/i...
and lows from 1965-2003 http://www.suite101.com/discussion.cfm/i...

From Barron' s 10/17/05
The American Association of Individual Investors
Bulls 39% Bears 48.1% Neutral 12.9%
39/(39+48.1) = 44.78%
Four Week Average = 52.16%

Historic dates for comparison:
7-16-98    44.3%        S&P 500 Close 1186.75
10-12-98   36.76%       S&P 500 Close  984.39
4-3-00     77.78%       S&P 500 Close 1505.97
1-1-01     58.82%       S&P 500 Close 1320.28
4-4-01     51.35%       S&P 500 Close 1103.25
9-10-01    47.34%       S&P 500 Close 1085.78
9-17-01    42.11%       S&P 500 Close 1038.77
9-21-01    41.08%       S&P 500 Close  965.80
7-19-02    32.88%       S&P 500 Close  847.75
7-23-02    32.88%       S&P 500 Close  797.70
10-9-02    42.36%       S&P 500 Close  776.76

As of October 14, 2005 close
The CBOE Put/Call ratio 10 day moving average is at 1.07. http://stockcharts.com/def/servlet/SC.we... The VIX Market Volatility Index closed Friday at 14.87. http://quote.yahoo.com/q?s=%5evix&d=t

-- posted by SteveT

» Normxxx - FAST OCTOBER RALLY ON TRACK!

» Normxxx - Re: Investor Confidence Index Falls to 78.6 in October

You neglected to mention that it is a contrary indicator!

"The State Street Investor Confidence Index has dived to a level not seen since the hedge fund debacle of 1998. Historically, other times we've seen such low confidence numbers, the market has risen over the next several months."

-- posted by Normxxx

» hairie31 - Hulbert Sentiment Index: Bearish

The as of Friday, October 14, the HSNSI stood at minus (-30.1), about where it was at the low at
the April of this year.

The Hulbert Nasdaq Newsletter Sentiment Index (HNNSI) stood at a very bearish minus (-69.2)

This all indicates the average Newsletter porfolio is "short" the market.

From a contrarian point-of-view
this all is very Bullish.

-- posted by hairie31

» bob90245 - Re: Hulbert Sentiment Index: Bearish

Thanks, hairie31, for the tip. Here's Hulbert's full article:

Never an encouraging word

By Mark Hulbert, MarketWatch
Last Update: 8:00 AM ET Oct. 21, 2005

ANNANDALE, Va. (MarketWatch) -- Now that's more like it.

Two and one-half weeks ago, when I last wrote about stock market sentiment among investment newsletters, I reported that we had not yet seen the capitulation and throwing in the towel that is often seen at significant bottoms. Read archived column

We may be seeing it now.

Consider readings of the Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average stock market exposure among a subset of short-term market timing newsletters tracked by the Hulbert Financial Digest. Last Friday, the HSNSI dropped to minus 30.1%, very close to its lowest level in over six years.

(The negative reading means that the average short-term market timing newsletter tracked by the HFD is recommending that its subscribers be short the stock market.)

Besides Friday, the only other time over the last six years when the HSNSI got any lower was at the market's mid-April low, and even then it was only barely lower. The index then dropped to minus 30.6%, and a nearly 600 point rally in the Dow Jones Industrials Average ensued.

Contrarians were not surprised, since the market typically does the opposite of what the majority expects it to.

To put Friday's low reading in an historical context, consider that throughout the 2000-2002 bear market, the HSNSI never dropped below a negative 17.7% -- and averaged 32.5%. Just as the stock market descended a slope of hope during that bear market, the market may be preparing now to climb a wall of worry.

A similar portrait is being painted by the group of market timing newsletters the HFD tracks that focus on timing the Nasdaq market. The Hulbert Nasdaq Newsletter Sentiment Index (HNNSI) dropped last Friday to minus 69.2%, reflecting an even more aggressively bearish stance among Nasdaq market timers than among those who focus on the broader market.

This recent HNNSI reading is, with but one exception, the lowest level witnessed since the summer of 2002, when the Nasdaq Composite Index was trading below 1,300. That exception came in August 2004, when the HNNSI dipped to as low as minus 78.6%. The Nasdaq Composite rose more than 20% over the next four months.

There are no guarantees, however, as contrarians would (or at least should) be among the first to emphasize.

But to be bearish now, you are in effect betting that average short-term timing newsletter will be right, something that it usually is not.

-- posted by bob90245

» SteveT - October 21, 2005 Sentiment

I am using the VTO report for the II data. http://vtoreport.com/sentiment/sentiment...
Note for clarification historic sentiment tables are for that current week and not the four-week moving average.

Investors Intelligence Bulls 45.3% Bears 29.5% Correction 25.2%
45.3/(45.3+29.5) = 60.56%
Four Week Average = 63.15%

A few historic dates: 7-20-98 68.42% 10-12-98 47.41% 4-3-00 67.79% 1-1-01 64.10% 4-4-01 58.91% 9-17-01 52.0% 9-21-01 48.7% 7-19-02 47.2% 7-23-02 47.2% 10-9-02 50.0%

Sideline Money Bears + Correction =54.7%
Four Week Average = 51.55%
hairie has researched some fascinating numbers for all time high bulls readings going back to 1965. http://www.suite101.com/discussion.cfm/i...
and lows from 1965-2003 http://www.suite101.com/discussion.cfm/i...

From Barron' s 10/24/05
The American Association of Individual Investors
Bulls 43.1% Bears 35.9% Neutral 21%
43.1/(43.1+35.9) = 54.56%
Four Week Average = 52.15%

Historic dates for comparison:
7-16-98    44.3%        S&P 500 Close 1186.75
10-12-98   36.76%       S&P 500 Close  984.39
4-3-00     77.78%       S&P 500 Close 1505.97
1-1-01     58.82%       S&P 500 Close 1320.28
4-4-01     51.35%       S&P 500 Close 1103.25
9-10-01    47.34%       S&P 500 Close 1085.78
9-17-01    42.11%       S&P 500 Close 1038.77
9-21-01    41.08%       S&P 500 Close  965.80
7-19-02    32.88%       S&P 500 Close  847.75
7-23-02    32.88%       S&P 500 Close  797.70
10-9-02    42.36%       S&P 500 Close  776.76

As of October 21, 2005 close
The CBOE Put/Call ratio 10 day moving average is at 1.09. http://stockcharts.com/def/servlet/SC.we... The VIX Market Volatility Index closed Friday at 16.13. http://quote.yahoo.com/q?s=%5evix&d=t

-- posted by SteveT

» Normxxx - Insiders are bullish

By Mark Hulbert, MarketWatch | 26 October 2005

ANNANDALE, Va. (MarketWatch)— When a month ago I checked in with what corporate insiders were doing, I found early indications of bullish behavior. Read archived column

We now have a month's worth of additional data on insider behavior, and the picture painted by these additional data is even more bullish.

Corporate insiders, of course, are a company's officers, directors, and largest shareholders. It stands to reason that they know more about their companies' prospects than do you or I, which is why they are required by law to report to the Securities and Exchange Commission whenever they buy or sell shares of their companies' stock.

A number of research outfits gather these data and report them, along with aggregate data reflecting the behavior of all insiders. One such service, which is monitored by the Hulbert Financial Digest, is Vickers Weekly Insider Report, published by Argus Research.

Interpreting insider behavior is not as straightforward as it might otherwise appear. For example, insider selling need not mean that the insider is bearish on his company. After all, he might need to raise cash to buy a house or send a child to college.

This consideration is especially important to keep in mind since, in recent years, a growing percentage of executive compensation has come in the form of shares and options.

By the same token, a purchase need not mean that the insider is bullish. For example, his purchase might have occurred because he is exercising an option with the intent of immediately selling.

Neyhat Seyhun, a finance professor at the University of Michigan who has extensively studied insider behavior, has found that the type of insider behavior that carries the greatest bearish significance is selling in the face of a declining price. That suggests that insiders want to get out of their companies' stock at all costs, and this definitely is not good news.

Selling in the face of a rising stock price, in contrast, is not as bearish.

This puts insider behavior during the market's September-October correction in its proper context. It would have been very bearish had insiders had continued to sell their companies' stock at the same rate that they had during the summer rally.

But they didn't.

When I was writing my late-September column, when the September-October correction was still young, insider selling had already begun to ease. Vickers was reporting that the ratio of insider selling to insider purchases had declined from 6.98 prior to that correction beginning, to 3.14.

As of the most recent issue of the Vickers Weekly Insider Report, dated Oct. 24, this ratio had fallen even further to 1.52.

Vickers concludes: "Such a strong improvement in insider sentiment in the wake of relatively mild market weakness appears to be a strong indication that the broad market averages should improve significantly over the next several weeks."

Google insiders

While I'm on the subject of insider buying and selling, I want to respond to a reader who is outraged by the large amount of insider selling at Google. In his opinion, those sales amount to a vote of "no confidence" in the company by insiders, even as individual investors are being seduced into buying more of the company's stock.

But, as I mentioned above in reporting on Seyhun's research, insider selling in the face of a rising price is not particularly bearish. It would be one thing if Google's stock were declining. But, far from falling, the company's stock price is skyrocketing. In that context, recent selling from Google's insiders is not particularly alarming.

In fact, there is some evidence suggesting that aggressive insider selling may actually indicate that the insiders do not have any undisclosed negative information about the company's prospects. This evidence comes from a study conducted by three finance professors: James Hsieh of George Mason University and Lilian Ng and Qinghai Wang of the University of Wisconsin at Milwaukee. Read academic study

The professors found that a company's stock price often performs worse following periods in which insiders have neither bought nor sold than after periods in which they have been heavy sellers. These researchers suspect that this is due to legal restrictions that discourage insider selling in the months prior to negative information begin made public.

As a result, they conclude, aggressive insider selling "might even suggest that insiders do not have negative information" about their companies' prospects.

At a minimum, therefore, this study suggests that the heavy selling from Google's insiders might not be as bearish as it otherwise appears.

______________


The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx

» Normxxx - Re: Re: Insiders are bullish

Yes. I like your approach of "pruning" when things get too high and getting "back in" when the price has come down a bit. Reminiscent of Don Hays, who also suffers from a somewhat bullish bias but does not seem to be greatly affected by it since he "harvests and prunes" and later "plants" again.

No problem with being "too chicken" to go long or short; when the "crazies" take over, the price is unpredictable, and the only thing that might work are straddles or strangles. But that might be too bullish (or, alternatively, too sophisticated) for JJ.

-- posted by Normxxx