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Sentiment Galore
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Sentiment Galore

by MoleMay 19, 2011

Well you get another post, lots of moving parts in today’s market… Part of the reason you are getting so many posts, is that I have no position in the market. I have no edge here, and I am obviously digging deep in analysis to examine the most *likely* outcome.

Honestly the lists of divergences and poor breadth indicators are growing daily. Mole’s volume comment is not joke when one looks at cumulative NYSE and Nasdaq Adv- Dec volume. That being said, I am still waiting for some other indicators to diverge (another post another day)

FWIW I am seeing lots of talk of the AAII sentiment survey . It is one survey, and I recommend using more than one. AAII and TSP both stayed low while II, NAAIM, Consensus, and Market Vane all stayed high in 2007. There are many different types of surveys. As for put/call ratios, they are utterly mixed right now; yet, they are certainly divergent as I have shown earlier.

Today I am going to walk you through why reading headlines and looking at raw data can have caveats.

This is my sentiment survey index with multiple Bollinger bands. You will need to click the chart to enlarge it and see it more clearly.

Now remember how I got so bullish during the Japan incident? (a) bull market rules were in place (b) we were in the 3 stdev white (c) the rate of change (few charts below), was way in the red….

My point is that (1) we have divergence and (2) the momentum/ bollinger bands also say we have room for a little more bearishness. Now here is more…
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More of Volar’s charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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That index alone is great, but consider it 2 more ways to look at the same data, (1) absolute value (2) rate of change. Both are below and show that it’s prudent to be patient.

This is my sentiment survey index in raw terms. Notice how it is neutral.

Here is the rate of change in my sentiment index. This just goes to show that patience may pay off if one wants to catch a quick dip before the big flush….

Nothing exciting like the AAII would lead you to believe. Or in other words, just because one sentiment survey (that public generally follows) says “buy,” it does not mean jump in with both feet. In fact the AAII was very very divergent during the high of 07.

To wit:

Don’t get me wrong, this one sentiment survey is bullish in the shorter-term. The problem is that is one of like 15 indicators that I really follow. Who is to say we dont have a little bounce and flush like 07? Also notice how long investors can stay bearish… but more importantly… the lack of follow through (aka new bullish sentiment) also signifies a potential turning point.

As for other survey indicators (not in my index), they also do not suggest the world of investors are utterly bearish. The reason I dont use them in my index is a mathematical reason, I prefer %bulls/bears as opposed to a raw bullish % value. Same concept as puts vs. calls. I digress….

For due diligence, I will show you some other surveys.

Here is market vane:

it is not an actual survey just fyi, here is the definition (Thx mole)

The Market Vane Bullish Consensus is compiled daily by tracking the buy and sell recommendations of leading market advisors and CTA’s (Commodity Trading Advisers) relative to a particular market. The advice is collected by:

1. Reading a current copy of the market advisors’ market letter.
2. Calling hot-lines provided by advisors.
3. Contacting major brokerage houses to learn what the house analyst is recommending for the different markets.
4. Reading fax and e-mail sent from advisers.

and Consensus Inc.:

**** UPDATE as of FRIDAY MORNING*****

Many claim to study smart vs. dumb money. Many suggest that the OEX has smart money, and others, especially the NASDAQ, dumb money. Here is the OEX PUT/CALL RATIO. The OEX (S&P100) is supposed to have less retail trading, or that is at leas the theory.

Basically, if this has any credence (I am not sure), we should be cautious. I am skeptical of this indicator, but figured it would be prudent to let you know. Now what does this have to do with my sentiment data? Well, someone, an old timer, once told me, “when you see crap that looks odd or really strange don’t ignore it.” So I am not. Moreover, if for some reason the indicator is not “smart money” it is certainly odd. Why so many puts in the OEX (S&P100) and not the SPX?

I will also add, and leave you with, more on margin debt. Here is NYSE+FINRA (aka Nasdaq). I am adding this bc it also shows you that just bc a weekly index (one index) says people are bearish, think twice.

FYI I am leaving equities alone! I have no edge here. I have my little computer trading for me, but that intraday thing is irrelevant to a sentiment update.

Bottom Line: careful looking at one indicator. Also careful looking at one indicator in only one way. I for example thing less bullish sentiment and call buying on recent highs, in the context of record COT and Margin data, is a sign that the market is actually… WEAK. Or the longs that have been long, why would they be more bullish at higher prices, have the bears started to capitulate? I dont know, but keep in mind that we could be in a transition point- especially when you start looking at the breadth indicators.

Stay unbiased and enjoy your weekend rats, I am probably out tomorrow given the massive participation in the market today…

-Volar

ps for noobs if you want to see a hammer LNKD hehehehe
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About The Author
Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • http://evilspeculator.com molecool

    “I have no edge here, and I am obviously digging deep in analysis to examine the most *likely* outcome.”

    Call me lazy but that’s usually when I leave it alone and I simply watch. Over-analysis is not an answer IMHO. Our egos keep telling us that there is an answer out there if we only spend the time and employ our ‘superior’ brain power. Frankly, the markets are like the seasons – sometimes it’s edge season and sometimes it’s time to sit things out.

  • volar

    entirely agree 

    sitting on my hands
    no reason to try to trade something that is not there…

    no ST buy signals (besides AAII) and some potential LT sells

    lame… lame.. lame..

  • http://evilspeculator.com molecool

    The AAII is currently paving the way. Most likely we’ll see one more spike up, followed by ‘no one saw it coming’.

  • http://evilspeculator.com molecool

    You might want to go in there and explain Market Vane. Here’s a link for your convenience:

    http://www.investmenttools.com/equities/weekly/market_vane_bullish__.htm

  • Anonymous

     Love it

  • Anonymous

     http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=3&dy=0&id=p49710973342&a=234770526&listNum=1

    There is not much room left for fiddling around. One last doji perhaps, and then the fun part will start again.

  • Anonymous

     Also no edge by my way of looking at things

  • OllyVaradi

    Biggest blue spike I’ve ever seen on the EUR$. A buy? Anyone?

    06:17 ET

  • Anonymous

     No Idea, but will be interesting to see the outcome.

  • OllyVaradi

    Just had a tiny nibble at a long here. Already realised I’m too early on that trade. Needed to wait for further confirmation. Small potatoes in though so paying for the lesson today.

  • OllyVaradi

    Not for the feint hearted this FX trading is it? Just 10 more pips and the markets bound to turn…..LOL.

  • http://profiles.google.com/acabrera768 andres cabrera

     Forex trading is different. Like I’ve said before I have been trading in the forex for more than a year now. And yea it is a different animal but i love this rodeo called forex.

  • OllyVaradi

    I’m going to stick with enhanced interrogation at Gitmo. Less painful……

  • Anonymous

    The OPEX screw factor?

  • volar

    cheers. the sad part is there is little option OI to make it fun 🙁

  • Anonymous

    For some months (or years) now Options Expiration has not been the high volume affair it was in the past. 

    I think the Silver portion of the market will break that pattern today.  There is a major imbalance in the Silver options and today is the last day to protect the put holders gains or to take them away.  Typically it is big money who are the option sellers and Max Pain is a metric that bets the sellers will move the market to make as many options expire worthless as they can.  Sometimes it works sometimes not . . . perhaps more small investors have discovered the wisdom of being an options seller.

    http://www.optionpain.com/OptionPain/Option-Pain.php

    NYSE I don’t know anything about the current pain calculator though I will read up at some point

  • volar

    that is a great link. I wish I had historical data.. actually i know were i can find that I think, anyways SLV

    http://content.screencast.com/users/wprosser/folders/Jing/media/8a79e8ff-096a-4be1-bcaf-e2a3576a4881/2011-05-20_0717.png

  • volar

    FYI I added one more kick ass treat to the post pertaining to OEX (not OPEX)

     

  • Anonymous

    If you drag your mouse over the pink or green areas it tells you what the total value of all puts or calls at that strike are now worth.

    I’m not sure what the update periods are . . . likely overnight

    For instance at SLV $34 the total of all the May puts is worth over $230,000,000 at closing levels last night
    While May calls only worth less than $12,000,000 . . . about 20 to 1

  • Anonymous

    NIX that chart had not updated

  • volar

    Ya I am a lazy ass lol i like to just look at the OI on the NQ

    i think my quick math is a weighted average 1.38 puts/calls OI on the MAY NQ

    http://content.screencast.com/users/wprosser/folders/Jing/media/883c81b9-8675-486a-9d11-f281e87e117f/2011-05-20_0800.png

    QQQ jives whith that too

    http://content.screencast.com/users/wprosser/folders/Jing/media/515a94c6-a0cd-4d3a-9ae9-48c4a9fed517/2011-05-20_0802.png

     

  • OllyVaradi

     That Euro chart looks like the Alps. They always were fond of the downhill, my European cousins. Anyway, my FX adventure is over – two longs, one winner, one loser, net small loss. Fortunately out before the downhill event started. I’m going get me a cowbell and cheer you FX guys on from now, let me know when your on the ramp.

  • Kudos

    I love skiing 🙂 

  • OllyVaradi

    Wish I did. I’m the Eddie The Eagle Edwards of FX.

  • Anonymous

    I like the idea of max pain in silver, combined with the extreme bearish indicator Volar posted the other day. Joining the Silver longs at 34.67 (that is the XAGUSD spot) after a shake out.

  • Anonymous

     Mr. Bucky’s looking pretty strong for the moment as it looks like “The Rain in Spain Falls Mainly on the Plain”.  I’m seeing a few reports of of a lot of protesting going on over there.  If there are any members from Spain or near by, perhaps they could verify if these reports are true. 

    Was thinking an “Evil” thought this morning that one way they could drop this market is to blame the Euro or blame China for wasting too many resources building uninhabited cities and building too many ships that aren’t going anywhere.  This way, the PTB might have political cover and could say it’s not our fault.  Just an Evil Thought.  🙂

    BTW, has anyone looked at the Baltic Dry Shipping Index lately?

    http://www.bloomberg.com/apps/quote?ticker=BDIY:IND

    P.S.  Not going to get too excited about this move as it might be just another effort to suck in what few Bears are left.   BWDIK?

  • Kudos

    I had a shitty day yesterday. I was betting on a trend change in the dollar, wasn’t trying to actively trade it to much. Considered 1.4450 on eur/usd a fail. My strategy of selling puts and buying /dx afforded my some patience since the puts cushioned yesterdays loss.  You just got to know your strategy, have a plan and stick to it.

  • volar

    IF EUR can not get a bid on that 5 min hammer w/ that kind of volume…..

    what a kiss of death this am !

    http://content.screencast.com/users/wprosser/folders/Jing/media/d79be730-da6b-40ed-9d69-a656a8d5d703/2011-05-20_0842.png

  • Kudos

    I’m no expert at FX, but I wouldn’t pay attention to trying to trade any 5 minute/15 minute chart. I think the 30 minutes and the 90 minutes are really what you should pay attention too.

  • volar

    Agree. i have a 30 minute chart on the screen, but during equity hours (w/futures volume), I do like 5 min charts

  • Anonymous

    All time frame views of market are valid within their timeframe

    but it is wise to be aware of broader time frames than the one you are trading.

  • Anonymous

    TICK was hardly positive today – a trend day.

    I mean, i know it’s opex friday and we are supposed to go up and down, but this TICK doesn’t promise much.

  • tradingmom

    Morning, all.  My bear flags played out just as hoped for.  Interesting signal right now (11:15 eastern) on zero though. 

  • Anonymous

     Wonder if they’ll take SLV to $36 just to squeeze some Put buyers?

  • volar

    nice retest of trend/channel for CAT as well….. I took the same trade… but I am still worried about that stupid volume spike on the 17th..

  • bshah

    Are you long or short ? I was thinking of short on y’day, but wanted to wait till 50 day MA, and go full short, but it came back.. don’t know if it’s too late.. however 13day ma is about to cross 50 .. more bearish..

  • volar

    short CAT as of yesterday

  • Kudos

     Great signal on the zerofx, euro. The 2 print didn’t look like it registered on the 1k-tick because of the earlier 12 print, but spot on. 

  • Anonymous

    Great minds (?!?) think alike – i too have no position in the market
    However it has to break one wya or another sometime, or can markets remain range-bound for extended periods (1970s?) 

  • Anonymous

    Had the right setup for my OP EXp lightening plays.  SLV had 20 to 1 bias to wards puts at the open around 34.00 so I expected a rally today

    SLV  went down sharp at the open as Euro did as well.  I bought ZSL 20 puts
    at .20 each sold half at .70  take half of profit rolled into 19 ZSL
    puts at .05  currently bid .05 ask .10

    We’ll see what the day brings

    Risk Reward works for me

  • Anonymous

    Are these options expiring today, or are they June? 

  • Anonymous

    Risk Reward

    If you could pay $100 (Risk)  for 10% chance to make $10,000 (Reward) would you pay the $100?

  • Anonymous

    this market only goes vertical –  robots only party, humans not invited.

  • tradem4alpha

    I think this must be one of the most weirdest days I have seen (yes I know it’s OPEX, but still). In the first hour, TICK has been negative over 90% of the time and the biggest positive TICK was barely +400. ADI below -1250. Now internals are healing, but still…extremely weird.

  • Anonymous

    These are May options thus the Title of Options Expiration Lightening Plays above.

    This is not a play for most people

    But when a Stock I was bullish on for the short term and even more bullish on for Op Exp due to the 20 to 1 Put Bias. 

    Fell sharply at the open I bought ATM options for a reverse which I got took profits at 2 diff level 150% & 275% and reset stop higher.  Then took about half my profits and bought the 19 puts for .05 . . . if I those expire worthless I still a good day.

    Also Silver already surpassed yesterdays volume so a break out could lead to a nice run . . . perhaps to my 37.10 Gartley Sell price (Silver Futures that is)

  • Anonymous

    A true opex, with an added ingredient of no real volume.

  • Anonymous

     12:40 PM:  As much as I don’t like USO, I bought a few Calls to temporarily offset my negative Delta in SPY.   It appears that this market can not stand a Stronger Dollar.  Half the Dollar Gains have been wiped out and Bingo the Stock Market Reverses.   What a correlation.  Dollar goes down – Market goes Up – Oil goes up.  

    I’m still close to shorting WFC again but I want to see how it does going into the close.

  • Anonymous

    Buying more XAGUSD at 35.15 (getting greedy and doubling my stake). SL at 34.67 for all the positions.

  • Anonymous

    Back Short WFC.  Was going to wait for the close but it continued to drop even while market came back.   

  • Kudos

    paying 1% (100/10,000) for a 10% chance of getting $10,000 … yes, i’d make that trade often.

  • Anonymous

    What’s the transaction date? Can you give me the cost on June calls for this transaction?  I might as well leverage to the max.

  • volar

    anybody ever seen a quadruple hammer bottom on a daily chat before?

    Unfalkingbelievable

    http://content.screencast.com/users/wprosser/folders/Jing/media/a5b8f078-97be-426c-bc24-b11c0acc680d/2011-05-20_1130.png

  • http://practicalt.blogspot.com/ Gold_Gerb

     Buy 10 contracts.  Increase the odds to 100%
    (perverted math joke)
    😉

  • http://practicalt.blogspot.com/ Gold_Gerb

    logically, if you made the same play 10 times.
    a $1000 accumulated result losing, one will pay off, giving back not only the $1000, but $9000 as a thank you.
    very tough mentally, when you lose the 11th time (without a win!)

  • http://practicalt.blogspot.com/ Gold_Gerb

     Hey Mole, what do you call it when you’re Lazy and just have to ‘chew it over ‘ before you trade?

    Mental Mastication.

    (GG ducks)

  • Anonymous

     so what’s the meaning of that?  basebuilding?

  • volar

    oh just saying it is very rare. I usually bet against 3x bottoms so you can imagine my P&L  (mainly L) right now.

    SO i bet big agains a quadruple bottom figuring that a break of support would be a waterfall, oh well

  • Anonymous

     Something else that’s “Unfalkingbelievable”  is that during today’s action every 1 Cent Move in UUP has had an opposite .75 Point Move in the SPX.  I’ve been watching it closely today because I have positions in both UUP and SPY.   

    Today, it’s all about the Dollar.  Again.  Tim and Ben must get a little Queasy whenever they see shit going on with the PIIGS that lower the Euro.   

    This is the battle that’s going on and why the market is so fucked up.  It’s not about demand, valuations, net sales or anything we were taught in Business School.  No, unfortunately it’s all about Currency Manipulation, Fuzzy Math Balance Sheets, and accounting tricks that can make stock prices go up without any real growth.  

    Charles Ponzi would be proud.  

  • Anonymous

     LNG!

  • Anonymous

    Picked up a small piece of TVIX.
    http://stockcharts.com/h-sc/ui?s=tvix
    $20.70

  • bshah

    i was writing it to you.. after waiting for 2 weeks, i got tired and had limit order at 8.20.. got out and look .. what the fuckers.. man.. now they will dump it again on monday.. just option expiration and they want to fuck everyone.. mf..
    man.. 280 lost.. shit 

  • Anonymous

    GS is toast. Holding FAZ rock & roll.

  • bshah

    any news on it or what ? 

  • Anonymous

    this has zero to do with option expiration 

  • bshah

    now yes… must be something else.. but 20 min ago, i was of the opinion …when it was around 8.60 / 9..
    i can’t resist myself to now bid for Jun put… this shit is going to shed off some gain in next week. i am out at 8.20… fuck me.. but oh well.

  • Anonymous

    Export Approval.  Stock could double from here
     

  • bshah

    wild… look at the spread on options.. phooooooph.. 

  • volar
  • Anonymous

     LNG   15mm shares short.  Huge margin calls over the weekend plus new buyers = massive squeeze on Monday me thinks

  • Anonymous

    APPL is weaker than index. OPEX effect? Oil rallied, thanks to Obama’s great foreign policy – slapping your guest in the face right before the meeting. 

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨
    ¨°º¤ø„¸  N E W  „ø¤º°¨
    ¸„ø¤º°¨ P O S T “°º¤ø„¸
    ¨°º¤  B I T C H E S  ¤º°¨
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • Smiddywesson

    If this is a trick question on money management, then I would answer that it depends.  I’d take that trade depending upon the size of my account.  If all I had was $100, I’d have to pass.  [Naw, roll those dice]