Trader’s Narrative

After seeing a 25% rally, the reasons to be cautious continue to pile up:

ISEE Index
The ISE call put ratio, otherwise known as the ISEE index started the week off fairily high. The equity only sub-index came in at 169 on Monday and continued to stay elevated. On Tuesday it was 170 and today it closed at 167.

I’ve found the ISE sentiment tough to decipher during this bear market because of how strange it has acted but the 3 continuous days at 169 and higher show a level of call buying that we haven’t seen since very late last year (Christmas and beyond). That, as you’ll remember, was a very poor time to be bullish on the stock market.

CBOE Put Call Ratio
The more traditional put call ratio - also equities only - shows a similar picture. Here’s a 21 day moving average of the CBOE put-call ratio with the corresponding tops in the market:

Cramer Bullish
Remember Jim Cramer? The guy who was gutted like a fish by Jon Stewart? The guy who went on TV, almost weeping, telling people late last year to take their money out of the market for the next 5 years? Yeah, that guy, he’s bullish again and leading “Cramerica”, once again, to the slaughterhouse. Last Thursday he announced that the “depression” is over and the market has seen the bottom.

Earning Season
With the Alcoa (AA) kicking off earning season, we are now in a market cycle which lasts about a month and which is well known for its weakness. I’m not sure why exactly earning season is a bad time historically to be invested in the market but it is. Numerous studies have shown it to varying degrees. You can stay up to date with this earnings calendar from the Wall St. Journal.

Sentiment
Finally, as I’ve mentioned already in previous sentiment overviews, we’ve seen a general return to optimism through the various sentiment indicators and surveys. Although some of this is to be expected and warranted for a return to normalcy, it is another element we have to throw into the pot.

The sideshow to the dead cat bounce (more like a rocket ride) was the brewing TV feud between The Daily Show and CNBC. If you missed the final show down, check out the link to watch the complete, unedited version. While Stewart rightfully gutted Cramer like a fish, what I wish Stewart had mentioned explicitly is that if you give a platform for analysts, CEOs, etc. to spout off, then you also have the responsibility to fact check, ask tough questions, research, etc. You know, journalism. It is a sign of our upside down world that a comedian is playing the role of a serious journalist while a former hedge fund manager is playing a clown.

That and more, in this week’s reading list at news.tradersnarrative.com:

• Jon Stewart’s secret Wall St. insider connection
• Suppress the Urge to Call the Bottom
• Parabolic Move in Financial Sector
• One Last Bubble Remains to be Popped
• Bear Market Rally… or Real, Lasting Reversal?
• Stocks That Aren’t Coming Back
• Ignoring the Austrians Got Us in This Mess
• Greenspan Tries to Re-write Monetary History
• How Wall St. Bought the Govt & Cut Regulation at the Knees

And remember to check regularly since there are links added regularly throughout the week.

If you missed yesterday’s The Daily Show with Jon Stewart, then do yourself a favor and watch it online. Not only does Jon rip CNBC and Jim Cramer a new one, he devotes a good part of the whole show to the “Decession”.

My American readers can watch the episode here:

Fellow Canadians can watch the episode here.

There is the usual Daily Show edit cuts but the most damning satire is reserved for CNBC’s Carl Quintanilla interviewing Sir Allen Stanford. But more than satirizing CNBC, Stewart asks some incredibly cogent questions like, why are we, in effect, buying the same toxic assets twice?

I stopped watching CNBC, even for entertainment purposes, years ago. When the history of our time is written, I hope they and the general mainstream media get the treatment they so richly deserve.

Does anyone really watch CNBC anymore? seriously? If you do, please tell me what I might be missing. I’m sincerely curious if they have any saving graces at this point.

Last night Alan Greenspan appeared on the Daily Show with Jon Stewart to promote his new book: “The Age of Turbulence”.

Jon Stewart asks him a very intelligent question that I never would have guessed he would broach. Greenspan’s answer is as surprising in its candour.

If you haven’t already, read “Gold and Economic Freedom”, an article Greenspan wrote in his younger days and which was published in Ayn Rand’s “Capitalism, the Unknown Ideal” in 1966.

Oh and regarding his forecast abilities, Greenspan is too modest. In all his time as a private econometric consultant as well as his tenure as Fed chair, he was among the best contrarian indicators. Ever.