Trader’s Narrative

Here’s a quick overview of the different sentiment measures:

Hulbert Stock Newsletter Sentiment
The HSNSI fell to 8.6% after Thursday’s close. Although that’s not the lowest it has ever been, it is definitely low. To give you an idea, last May it fell to between 6% and 4%. But in the past it has signalled inflection points when it reaches well into negative territory. That is, when newsletter timing services are suggesting going short the market. Obviously we’re not there yet.

Market Vane
A similar sentiment measure, which doesn’t get mentioned a lot is Market Vane. It fell from its recent high of 75% in April 2007 to its current level at 56%. That might seem high but for the past three and a half years this sentiment measure has oscillated between mid 50’s to the mid 70’s. So right now it is about as low as it has gotten within the bull market. In the teeth of the bear market (late 2002 and early 2003) it was as low as 20%

AAII
What surprises me is that the Mom’n'Pop retail investors are nonplussed about the market decline. The AAII shows the bulls, unchanged, at 46%; while the bears declined 1% point to 39%. This is not the kind of sentiment reading that leads to a market bottom.

Other Surveys
I’ll throw the other sentiment measures into a grab bag: LowRisk, Consensus, and Investor’s Intelligence. They are all more or less in neutral territory. So they don’t really help us. Other than to show that we do not have any sort of panic or fear. Which according to contrarian analysis means that the bears are not finished quite yet.

ISE Boo-Boo
Although not officially a survey, the ISEE sentiment index is fast becoming one of my favourite indicators. It is like the good ol’ CBOE put/call ratio, but betterer. With its help, I spotted the hazy outline of a top.

But lately it has been driving me bonkers. Ever since I made the mistake with the CBOE put call ratio, I’ve been extra careful to double check indicator data and so I’ve noticed a lot of discrepancies with the ISE data.

The chart to the left is wrong. The ISEE never approached such ludicrously low levels as 51. The all time low for it is 58 by the way.

I talked to the person responsible for data integrity at the ISE and found that they knew about the problem. Although I was able to point out a few details they hadn’t caught yet. In any case I’m hoping that things will be resolved soon and I’ll have the ISE data to guide me once again.