Sentiment Update 6.23.11

The good news is that the leaches get a little treat, but the better news is that I (volar) have even more new charts for the rats. Obviously I have been long since my last post at roughly speaking 1265 (ESU11) 6/15/11. I added some longs this morning an hour into it. If I get stopped out 30 points below here that is life- no ego here, just a trade.

For the leaches:

And for the rats, here is the quality hooch again.

Well you can see why I am so very patient and keep deep stops. I am not picky about my entries; I am picky about my stops and my profit targets. We obviously had a panic day, and I got long on that day. Of course a JLL quote:

“The big money was not in the individual fluctuations but in the main movements-that is, not in reading the tape but in sizing up the entire market and its trend.  The market does not beat them.  They beat themselves, because though they have brains they cannot sit tight.”

Word. Word. And Word.

Now just to show you that economic data, news, and Greece really “matter,” the Citi economic surprise index:

Now I know this seems “shocking,” but honestly if you study crowd theory, this  makes perfect sense. And per the usual, what is the ROC (rate of change in that index)? Well CSFB already did that:

It is clear that we just had a major shift, and the odds of economic forecast “misses” are quite low.

Now here is a quick blip on money flow.

All this news is scaring the retail retards…… Sure does not look like the distribution back in 2007 to me.

Now I have historically tracked RYDEX mutual fund asset flows, but ETFs have taken over that market. So here is the money flow into Rydex ETFs.

It appears that some money was pulled from the bull funds and placed into the bear funds.

And here is the high beta ETF (Rydex small cap & growth) assets to further support that statement.

This just goes to show that we had some money leave risky assets.

Now on to sentiment surveys.

Scott and sentimenttrader both have touched on small trader option activity. I have only 2 years of that data… still digging for it and will pay for it when I find it.  It is weekly data from the OCC (aka all exchanges). The data is unique as it is not all transactions, but only the open- to- buy and open- to- sell transactions (a better gauge of sentiment). The ISEE does the same math, but only for the buy to open, not the sell to open.

Here are two different ways of looking at that data.

First the net volume, not the ratio.

Clearly retail is buying puts.

And here is that ratio including open to sell transactions.

This also shows that it is not just the put buying, but lack of put selling.

And just to beat a dead horse… here is the VIX Put/Call Ratio

As a contrarian, when I see people buying calls on the VIX, I get bullish.

As for the surveys, well not much has changed, most are bearish.

Traders are still bearish, the media is emotional, and I am just trading my rules. Even if we are in a bear market my rules say to buy, so I am long.

That being said the Daily Nasdaq Sentiment Index is utterly bullish; as is the option buyer’s sentiment gauge  (descriptions and details at Market Harmonics)

Finally I will end with some more stats from last night’s quant post. I re-imported the data to ensure it was correct, and I changed the holding period to 10 trading days. I excluded data pre-1990 as I don’t trust that VIX (VIX 100 specifically) data very much.

The drawdown is the max intra-week loss for 150 days added to the max peak to trough loss to conservatively estimate a drawdown. Or realistically one would expect 7-20% with 0 stops in place.

Best  of luck trading,

-Volar