Trader’s Narrative

Last year when InstantBull.com came out, I wrote a somewhat negative review. I was a bit miffed that it jacked my browser and I didn’t see a point to its nature as an aggregator.

I’m glad to see that InstantBull no longer jacks browsers but I still can’t see the point of sites like MyTrade.com or SaneBull.com which are simply clones of netvibes, iGoogle and other superior offerings out there.

I look for the value added but can’t seem to readily find it. Anyone can set up a similar page without using their services, so why wouldn’t they? But I’m rethinking InstantBull’s value added. For someone who is new to trading blogs, it offers a great way to stumble on a whole pile of them. And for those who are still scared of RSS and setting up a reader, it can be the next best thing.

The only short coming is that it doesn’t allow for you to add your own RSS feed. So you can’t make a customized list of blogs to read the way you could, say with Google Reader or Bloglines.

But Gal (its founder) has added a few interesting but simple features which do add value.

You can search trading messageboard threads by stock ticker (symbol). Its a good way to stay on top of what is being said about a stock. But I wonder why Gal doesn’t include elitetrader in the messageboards he searches? It is the grand-daddy of them all. Maybe there’s a technical reason, but all the same I’d recommend he look into this.

And now, you can now rank all the blogs according to their Alexa (traffic) and Technorati (incoming links) ratings. So at a glance you can find the most popular trading blogs. Another way Gal could rank the blog would be according to their RSS readership numbers.

Of course, just as in high school, popularity doesn’t necessarily mean quality. But all the same, being a hyper competitive SOB, this new feature speaks to me

I’m pleasantly surprised to find that Trader’s Narrative is in good company being in the Top 10 according to Technorati and Top 12 according to Alexa.

With the historic and surprising bearish AAII sentiment, I wondered about the “sheeple” index that I mentioned about a year ago.

This proprietary index of mine looks at the retail brokers web traffic and uses it as a measure of retail investor participation in the market. I look at the three most popular online brokers: ScotTrade, E-Trade (ETFC) and TD Ameritrade (AMTD). I ignore the more trader oriented brokers like Interactive Brokers (IBKR) and CyberTrader (SCHW) because I’m trying to only measure the activity of Mom’n'Pop investors who are casual in their market participation. I want to track only those who are less knowledgeable about the market and more apt to get swept up in the vicissitudes of the market, swinging from euphoria to despair and back again.

The graph shows the merger of TD Waterhouse (red line) with Ameritrade (yellow line) so the spike up you see is the new website coming online, replacing the old one. Anyway, in the graph you can see that the traffic for the different online brokers not only ebbs and flows as a group, it does an impressive job of reflecting the moods of the average retail investor out there. For example, notice how in the summer of 2004 the traffic hits a low just as the market was forming an intermediate bottom.

Click for Larger Graph

Alexa has several ways of measuring web-traffic. Here is another way (daily reach) that shows very similar patterns:

Click for Larger Graph

The retail investor has definitely been sitting this one out. Since early 2006, even as the market has powered ahead, less and less people have logged on to their online accounts to participate.

Interestingly, the most recent results for May are showing a dramatic uptick - but is it short-term noise or are the retail investors and traders beginning to enter the market?

The Alexa numbers are very erratic and this could very well be just a blip. Only time will tell. All we can say now is that it confirms the lack of love towards the market by the casual investor and trader. Which means that the market participants are for the most part commercials, institutions and professional traders battling it out.

Even more surprising, analyst buy recommendations are at a 10 year low for US stocks. This, eventhough we are seeing a powerful showing of earnings on Wall Street. Which is, in turn, helping to give this market a reasonable price/earnings ratio.

And finally, according to Commitment of Traders the small speculators are positioned short right now.