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Sentiment Overview: Week Of February 20th, 2009 at Trader’s Narrative





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Here is the sentiment wrap-up for this short but exhilarating trading week:

AAII
As I briefly mentioned yesterday, the weekly AAII sentiment survey shifted significantly. Optimists fell to 22% (a fall of 11% points) and pessimists weighed in at 57% of respondents - an increase of 18% points from last week. While this is a welcome from a contrarian perspective, it isn’t the lowest or even one of the lowest ratios we’ve seen historically.

Investors Intelligence
In contrast, according to ChartCraft, the editors for stock newsletters continued to shift restlessly, increasing a tiny amount in bearishness to 41.1% (and a small decrease in bullishness 31.1%). Not very helpful.

ISEE Options Sentiment
When the market broke the January lows on Tuesday (February 17th, 2009) and looked like it might not just approach but break through the November 2008 Maginot line, you’d imagine that the majority would be drenched in fear and grabbing all the puts they could get their hands on. But judging from the ISEE index, small time option traders are nonchalant about any such potential danger.

Take a look at the equity only ISEE data for the past few months (the higher the ratio, the more optimism it reflects):

ise sentiment equity only long term Feb 2009

Not only have they been buying more calls than puts (to open trades) during the harrowing but short trading week, this ratio actually went up on Tuesday’s wide range decline. The only consolation is that such puzzling behavior is par for the course, as option trading data has been continually befuddling during this bear market.

CBOE Put Call Ratio
The more traditional CBOE put call ratio (equities only) spiked yet again above 1.0 - but we’ve been here before. It does, however, dove-tails nicely with the OEX put call ratio which I mentioned last week.

cboe put call ratio equity only Feb 2009

StateStreet Confidence Index
This lesser known sentiment indicator reached its low late last year - reflecting the dire straits that managers found difficult to deny after the spike down in October and November. Since then the regional data for North America has more than doubled from 30.6 to 64.5. And the global confidence index has recovered from its ‘all time’ low of 48.2 to reach 72.9 - which would imply that the average money manager out there is now back at the risk buffet. But remember that since the StateStreet confidence index is still a relatively new indicator, the best prescription is to take it with a truckload of salt.

Volatility
While the market is once again at the knife’s edge, the VIX volatility index is surprisingly low. While it did gap up on Tuesday, the VIX is still meandering around the 50 level - far from the 80 double peak in October-November 2008. This is less a separate confirmation of any sort and more a corollary of the crazy options market we’re seeing.

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One Response to “Sentiment Overview: Week Of February 20th, 2009”  

  1. 1 Charles Upton

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    Hey thanks for doing this series of posts, it’s a good one…

    and as far as the options mkt, here is an idea: as a whole, maybe its just not as “smart” as it used to be, or to the degree we might expect it to be…thus, it just “gets it wrong” alot of the times.

    Why is this?…perhaps because of an influx of “amatuers”? Any thoughts?

    -charleS

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