Market Indicators - Investor Sentiment

» SteveT - Re: Re: 3-8-34 Sentiment

Norm, I don't pretend to know if what I posted means anything. I was hoping to stimulate some discussion. I can't help but think some sort of pullback is around the corner. Only problem is who knows when it will get here and where the indices will be when it gets here. Thanks for the link.

-- posted by SteveT

» Normxxx - Re: Re: Re: 3-8-34 Sentiment

Unfortunately, so many indicators are giving weird, anomalous, or off-scale readings (both ways), that it is hard to get any fix on this market, even for contrarians. I think that this is a sign that there is no real bias in the market-- it could go either way, and big. But to go down big I think will need a catalyst; to go up big will require just time, it will just gradually move its range on up over the next year or so. I am still looking for a top in '05 but no major down move until '06.

Best bet is to stay fully invested in a relatively conservative portfolio (e.g., low PEs and relatively high dividends) and be prepared to move at a moment's notice. Remember, half the people in the market are poised to exit at the first sign of panic-- devil take the hindmost!

From A Usually Reliable Source

[Normxxx Here:  I tend to agree with the 40-year cycle (actually sometimes 20-years), but I do not think it as prescriptive of the markets as the author of the preceding piece. ]

-- posted by Normxxx

» SteveT - 3-15-04 Sentiment

Investors Intelligence Bulls 56.1% Bears 20.4% Correction 23.5%
56.1/(56.1+20.4)=73.33%
Four Week Average = 76.07%

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 =43.9%
Four Week Average = 41.28%
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 3/15/04
The American Association of Individual Investors
Bulls 41.3% Bears 33.6% Neutral 25.1%
41.3/(41.3+33.6)=55.14%
Four Week Average = 65.21%

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 March 12, 2004 close
The CBOE Put/Call ratio 10 day moving average is at .86. http://stockcharts.com/def/servlet/SC.we... The VIX Market Volatility Index closed Friday at 18.30. http://quote.yahoo.com/q?s=%5evix&d=t

-- posted by SteveT

» Normxxx - Recent insider selling is ominous

Insiders, of course, are a company's officers and directors as well as its largest shareholders. They are required to report to the Securities and Exchange Commission all transactions involving their companies' stock, and the SEC makes those reports public.

It stands to reason that we pay attention to insiders, since they presumably know more about their companies' prospects than you or I do.

Yet insiders have been extremely heavy sellers over the past 12 months. Those who assumed that all insider selling is equally bearish, and therefore went to cash when insiders became heavy sellers, have missed out on the market's rise of more than 30 percent over the past year.

Yet, as I pointed out in a column last fall, insider selling is not particularly bearish if it occurs in the wake of a rising stock market. I based that column on research by H. Nejat Seyhun, a finance professor at the University of Michigan, who has devoted much of his professional career to studying insider behavior.

Only if insider selling occurs in the wake of a market decline does it foretell likely market weakness, according to Seyhun.

The implication of his research therefore was that investors could draw no conclusions from insider selling so long as the market continued to go up. But, Seyhun told me in September, "if prices begin to decline from [current levels] and insider selling continues and/or accelerates" he would advise getting out of stocks.

Which brings us back to the present: The stock market in recent weeks has experienced its first correction in excess of 5 percent since the market took off a year ago.

And though we only have early precincts reporting - because not all insiders immediately report their trades -- it looks like the pace of insider selling increased during the recent correction.

For data on insider selling, I turn to Vickers Stock Research, publishers of Vickers Weekly Insider Report. Vickers gathers the insider data that are reported to the SEC and, among a number of other things it does with the data, calculates an overall ratio of insider sales to insider purchases.

Take a look at the accompanying chart, which plots weekly changes in this ratio since last summer. The ratio climbed steadily until late last year, when it began declining. But note in particular how that decline came to an end earlier this year, more or less at the same time that the market's correction commenced.

<img BORDER="0" width="400" src="http://cbs.marketwatch.com/news/image.as...">

That is not a good sign, especially if this trend were to continue.

The only consolation is that insiders tend to be early. Academic researchers have found that insiders anticipate downturns in their companies' earnings by at least three calendar quarters, and as much as nine calendar quarters.

So, on the assumption that recent insider selling is indeed bearish, we still may have at least until the end of this year before the bad news they are anticipating comes to pass.

-- posted by Normxxx

» SteveT - 3-22-04 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 52.5% Bears 21.8% Correction 25.7%
52.8/(52.5+21.8)=70.66%
Four Week Average = 74.43%

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 =47.5%
Four Week Average = 42.95%
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 3/22/04
The American Association of Individual Investors
Bulls 38.6% Bears 26.3% Neutral 35.1%
38.6/(38.6+26.3)=59.48%
Four Week Average = 62.06%

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 March 19, 2004 close
The CBOE Put/Call ratio 10 day moving average is at .97. http://stockcharts.com/def/servlet/SC.we... The VIX Market Volatility Index closed Friday at 19.15. http://quote.yahoo.com/q?s=%5evix&d=t

-- posted by SteveT

» hairie31 - Looking at 2004-2005

After being uncorrectly bearish in 2003, largely based on sentiment and valuations, I missed the 1 year rally in the Stock Market.

However, I haven't lost any money and am still 100 % in cash and should something go very wrong this year, I ready to jump in aggressively.

I should say first, I think the market will probably soar in 2005.
Why...there has never been a down year, for a year ending in "5".
(Refer to page 126 in Stock Trader's Almanac for a chart) since 1885. The average rate of return for a year ending in "5" +30.71 %. The "worst" year was 1965, and that was a + 10.9 %.

I've looked at all the indicators to predict the market direction. They all have stopped working at some point. The only one so far that hasn't failed is that years ending in "5" are up and the best performing year of the decade.

Maybe 2005 will be the first time this indicator fails...but I think there is something to this middle of the decade indicator.

So what would make the markets soar in 2005? There's got to be a excuse. How about a massive decline into November 2004, that takes everyone by surprise, just after record amounts of money reentered the market in early 2004 and sentiment was more bullish than in the 1999-2000 bubble!

So from a low in November 2004, a perhaps a rally taking the market soaring into January 2006, where I'd dump everything.

Also, the past three decades of years ending in "4" have not been good years: 1974(-27.6), 1984(-3.7)
1994 (+2.1). Will 2004 follow this trend???

I've been religiously following INTC as a "Early Warning Alarm" for the entire market. The first top at 34.12 on November 6, 2003 and a double top of 34.24 on January 8, 2004.

Since January 8, 2004, INTC is down
(-22.63 %) while the Nasdaq is down
(-9.87 %) and the Dow is (-5.13) and the S & P is down (-4.14 %)

Even if the S & P only declines 20 %, INTC could plunge -70 %. If INTC plunges to $ 15 a share or less, this time I aggressively BUY.

I think a Bush Re-election was prematurely baked into the market,
along the way, people lost all fear of a terrorist attack during the 1 Year + rally. Now it's coming back.

STILL...sentiment is very bullish!

Lastest Investor's Intelligence is
70.65 ( Bulls:52.50, Bears: 21.8)

Latest AAII is 59.47 (Bulls: 38.6, Bears: 26.3)

This leads me to believe that the correction has barely started.

I'd like to see the market slowly bleed to death into November.

Whether such a decline matches or exceeds the Oct, 2002 low will be interesting to see.

I always thought 2006-7 or 2010 would be final bottom of this Secular Bear Market. Maybe the it could all happen this year?????

Now... all we need is some Terrorist Type event to add a super-negative stimulant to the beginning down trend in the market and turn this decline into a massive panic.

Maybe then, bearish sentiment will take over, as investors panic, give up and sell.

One things I've really learned from the Oct 2002 -February 2004 rally is that when you're totally certain the market will only go one diretion.....it can do the exact opposite!

The next observation is that; it is one thing to be 100% in cash and miss out of a big rally (that's bad enough) it's another thing to be so certain that you go 200% Short the Nasdaq 100, case in point...one, Doug Fabian.

So..Bearish, yes....short, NEVER. I could be totally wrong like last year!

-- posted by hairie31

» SteveT - Re: Looking at 2004-2005

hairie, thanks for sharing your views. If I was pressed to guess I would say we dip for the rest of this month and move upward to new rally highs in the second Quarter. Course I am just as likey to be wrong too. I'll stick with my asset allocation style and rebalance when I get more than 5% off my targets.

-- posted by SteveT

» hairie31 - Investors Intell 3-24-04:66.18

First Reading under 70, in 11 months.(4/29/03 was 62.3)

-- posted by hairie31

» hairie31 - Dow 10,000: Line in the Sand

Today's interday low in the Dow was 10,007.49.

I was surprised the Dow ever got much over 10,OOO. The Dow never fully got over the 100 point level, from 1906 till 1942, some 36 years later.

The 1,000 barrier lasted about 18 ½ years from January 1966 to a final low of 1,086 on July 24, 1984.

So we may easily have another 13 years (or maybe a lot more than that) till the Dow clears 10,000 for the last time.

My sense is we'll be in a trading range from 6,000 to 12,000 in the Dow for many, many years. That my take based on previous history of the Stock Market.

So will hold 10,000? Only a 49 point drop will put it under 10,000 and I think that will be a big psychological loss for the market. A real negative for sentiment.

Of course..the market will do what ever it wants and can fool everyone

Stay tuned...the market is getting interesting!

-- posted by hairie31

» Normxxx - Can the Stock Market Be Propped Up?

http://www.financialsense.com/Market/wra...

"There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dimissed as the primative refuge of those who do not have the insight to appreciate the incredible wonders of the present."
- John Kenneth Galbraith, A Short History of Financial Euphoria

There is a significant amount of public opinion that the stock market will be supported from crashing by some form of organized support such as the Plunge Protection Team (PPT). I don’t know how many times people have said to me that the stock market would hold up, at least until the presidential election. Count me in the apparent minority who thinks that no amount of real or perceived organized support will prevent the market from going where the law of supply and demand takes it. Accordingly, while I don’t think that the rally from the October 2002 lows was fundamentally healthy, I do think it was based on simple supply and demand for stocks. The rally should be respected, and treated objectively. There is a buyer and a seller for every transaction.

-- posted by Normxxx