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Sentiment Overview For Week Of August 10th 2007 at Trader’s Narrative





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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
ISEE incorrect data chartAlthough 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.

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16 Responses to “Sentiment Overview For Week Of August 10th 2007”  

  1. 1 Bill Luby

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    Hey Babak,

    I’m glad I’m not the only one going crazy with the ISEE. FWIW, whenever I refreshed their site during the day today, I kept getting different data, including some with future time stamps (!) which made me think they were accidentally pulling it from the archives.

    Note that when you DL the historical data in spreadsheet format, Aug 8 is missing and Aug 7 is now the mysterious 51.

    I’ll send them a note.

    When the ISEE data is reliable, it is one of my favorite indicators.

    Cheers,

    -Bill

  2. 2 Dave

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    I find it remarkably unethical and irresponsible that ISE knew their published data was inaccurate and they failed to at least post something on their site about this simple fact.

    When can ISE data be considered accurate if there is no prompt admission of inaccuracy posted on their website?

  3. 3 Babak

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    Bill, I think everyone who uses their data should call and send them an email. Getting their contact info is very easy, just look on their website.

    Dave, I agree. It seems they don’t get how fragile trust is and how integral it is to success in business.

  4. 4 Dave

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    Note that the inaccuracy began several days ago.

    They had plenty of time to consider their actions, which is very sobering from a trust perspective.

  5. 5 Dave

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    This post, SENTIMENT OVERVIEW FOR WEEK OF AUGUST 10TH 2007, is a great contribution, by the way. Great thanks for posting it!

  6. 6 Babak

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    You’re Welcome Dave :-)

  7. 7 Super Saver

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    Babak,

    Thanks for your submission to the Festival of Stocks. (Yes, it was in on time :-)

    Agree with you the bottom still hasn’t been reached in this correction. However, with the infusion of liquidity by central banks, I think the bottom will be delayed a bit longer.

    This post is included in the August 13, 2007 edition of the Festival.

  8. 8 Bill Luby

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    I feel compelled to note that Schaeffer is now quoting the 51 low as if it is gospel: http://www.schaeffersresearch.com/commentary/observations.aspx?ID=19950

    If the ISEE hadn’t previously printed a 72 reading for the 8/7, I might believe it, but now we must conclude that either they made a mistake with the 72 on 8/7 (and just happened to miss a record low)…or they screwed up both 8/7 (the 51) and 8/8 (now unaccounted for.) I’m still guessing that the 51 is wrong and is an artifact of whatever problem also caused the missing 8/8 data.

    I have written to them twice. If they don’t correct it today, it’s time for a call and some ugly blog posts.

  9. 9 Babak

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    Bill, since I talked to the person in charge of data integrity at ISE and he told me that 51 was an ERROR, I’m pretty sure it is. The only thing that puzzles me is why they don’t publicly state this on their site and correct it ASAP.

  10. 10 Bill Luby

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    Oops. I must have missed that. Thanks for checking and boo on Schaeffer.

  11. 11 Babak

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    Bill, the tell is that the CBOE is nowhere near those levels. Its good to have a skeptical view and double check indicators when they go into outlier territory. The onus is on you since the data provider legally doesn’t really have any responsability to make sure things are 100% correct. Although, I would argue once they know things are out of whack, the least they can do is inform the public.

  12. 12 Dave

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    The fact that they don’t publically acknowledge this mistake is unbelievable. ISE doesn’t want to admit a mistake or what? Perhaps some of the big media market publications should be informed about this.

  13. 13 Sharon

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    Babek, this may seem like a stupid question but how did you determine that the 51 ISEE Sentiment Level was inaccurate? As importantly, how can we tell what the right number is in the future?

  14. 14 Babak

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    Sharon, as I mentioned I was more sensitive due to a previous mistake and by chance I noticed they changed the numbers over time (51 to 72) and skipping a day! Also 51 is below the all time low so that’s highly suspect, especially when the CBOE put call ratio is nowhere near that extreme level.

    ps my name’s Babak, as in Ba (as in far), bak (as in back)

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