Trader’s Narrative

Here’s this past week’s sentiment data:

Sentiment Surveys
Investor’s Intelligence (measuring the newsletter editors market bias) is showing a surprising amount of bullishness at 56.5%. This is a slight increase from last week. The II bears fell slightly to 22.4%.

In contrast to newsletter editors, the AAII survey (measuring retail investors) is showing only 36% bulls and 47% bears. Since last week the bears increased by approximately the same amount the AAII bulls decreased.

Although odd, this isn’t the first time these two sentiment surveys have been at loggerheads with each other.

Fund Flows
According to AMG Data, US mutual fund investors withdrew $15+ Billion from equity mutual funds (not including ETFs). Most of that was from domestic funds and the remaining from foreign funds.

This is HUGE!! I can’t really understand what is going on or even if this statistic is correct. If it is, it is larger than any weekly withdrawal for more than 6 years. It is even larger than what we saw in the darkest days of the 2002 bear market. Wow!

Some portion of this gargantuan number is due to the year end effect when mutual fund investors have their last opportunity to square things tax-wise. But as I already pointed out, this is nothing like we’ve seen in previous year end tax selling. Something big is going on. Obviously when people are selling their equity investments at such a torrent, it is wiser to exit the crowd or even fade it.

State Street Investor Confidence:

State Street is one of the largest financial firms in the world. They have a unique sentiment measure which relies on aggregate data from their position as custodians for investment managers:

Unlike other survey-based confidence measures that focus on expectations for future prices and returns, the Index provides a quantitative measure of the actual and changing levels of risk contained in investment portfolios representing about 15% of the world’s tradable assets.

The interesting thing is that this month, the State Street Investor Confidence Index plumbed depths which it had never seen in its entire history!

If you want to get more info on this sentiment indicator as well as full historical data (monthly), check out the FREE Trading Resource section (under Reports & Articles). While you’re there, be careful or you might find other interesting stuff to busy you for hours