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Retail Sucker Index Update

Retail Sucker Index Update

by The MoleJuly 8, 2010

No, I’m not talking about some new fangled Jaron Lanier inspired virtual reality device for the iPhone, although I have to admit that would be a kick ass toy for us tech addicts.

No, I promised you guys an update on the ISEE Index. Here’s the nutshell description from the website:

The ISE Sentiment Index is a unique put/call value that only uses opening long customer transactions to calculate bullish/bearish market direction. Opening long transactions are thought to best represent market sentiment because investors often buy call and put options to express their actual market view of a particular stock. Market maker and firm trades, which are excluded, are not considered representative of true market sentiment due to their specialized nature. As such, the ISEE calculation method allows for a more accurate measure of true investor sentiment than traditional put/call ratios.

Those ISE guys are so politically correct – disgusting. I think it should more aptly be called the RSI – and I’m not referring to the relative strength index – rather the ‘retail sucker index’. But that acronym was taken, so I guess they stuck with ISEE – cute enough. Well, I see red candles on the horizon – not necessarily today/tomorrow but sometime soon. Especially if we get a flat day by another push up – that would be just peachy by me:

I’ve doctored up yee ole’ ISEE chart I am maintaining in Excel. As you can see the 240 mark is usually where the fun starts for the bears, but of course it’s a bit relative and I wish I could figure out how to produce a Bollinger bubble in Excel (anyone??). But spikes into 260 are usually where you want to be long – a drop to 100 or below means you want to get out of your short positions and maybe get exposed long again.

The real magic happens above 260 and we are not there yet. We did however get a nice spike into 247 yesterday, which really surprised me. I mean look how little we have rallied and the bulls are tripping over each other to ‘buy the dip’ it seems. Suckers! Will they ever learn? Of course not – which is why stainless steel rats like us can eek out a comfortable living by accumulating our ill gotten gains on the backs of greedy permabulls.

Do I feel any sense of pity or empathy for taking suckers for all their got? Yes, there is a hint of …. wait… no, sorry – that was a bowel movement – all better now. Sheeeshh – that was close…

Of course I kid the retail traders – after all they are US! And Evil Speculator’s entire premise is to lead retail traders straight out of market purgatory and into Evil Rat Academy where they can graduate from sucker status to that of a consistent winner. How do we do that? By taking a long hard look into the mirror to see who we really are – after all, the first step toward change is self recognition. And the virtual mirror is posted right above in the form of my ISEE chart.

Is it coincidence that retail traders usually buy the top and sell the bottom? Of course not – as a matter of fact Wall Street was build on that type of herd mentality – how do you think they were able to amass huge fortunes over two centuries? Of course the whole game took a big hit when online trading made its appearance – investment banks had to look for greener pastures, which was the genesis of subprime and the credit bubble. As the saying goes – there’s a sucker born every minute…

But hey, that is a story for another day.



About The Author
The 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 the usual social media waterholes.
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