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Here is the weekly sentiment overview:
We already looked at the sharp move in the AAII weekly sentiment taking the bears up to 57% and the bulls shrinking to 21%. So rather than rehash it, if you haven’t yet, see: “Here’s the Fear: Almost at March 2009 Levels”.
The weekly newsletter sentiment poll created by ChartCraft shows a similar, but less extreme move. The bulls decreased to 37% and the bears increased to 34.8%. This provides a bull/bear ratio of almost 1 which is the lowest we’ve seen this sentiment metric since July 2009. But keep in mind that the survey was completed on Tuesday, a day before the short term tenor of the market changed with Wednesday’s huge rally.
NAAIM Survey of Manager Sentiment
We also looked at the NAAIM survey yesterday so I won’t repeat the analysis again. I just wanted to show a different method of charting the data that I’ve been experimenting with. It is a comparison of the weekly survey with its own rolling 13 week (3 months) moving average:
I’ve found that it is usually better at finding tops and bottoms. For example, it didn’t really flag an extreme until October 2007 which was better than the straight data itself. The one disadvantage is that in late March, when sentiment did recover, it had been so depressed in the short term that the ratio spiked up to the highest level (so far).
NDR Crowd Sentiment poll
Considering the above, it isn’t surprising that Ned Davis Research’s “Crowd Sentiment Poll” (itself an aggregation of 7 different sentiment polls) has fallen to dramatically after topping out recently in March 2010:
Source: Liz Ann Sonders (Schwab & Co.)
TSP Sentiment Survey
Last week I made a cryptic reference to a “secret sentiment survey” and ended up with a reader quickly identifying it as the TSP Talk forum survey - teaches me for underestimating my audience.
I’m still studying the historical data for this survey but for now, here’s a chart showing how it compares to the S&P 500 index:
AS you can see, I’ve lopped off the axis above 2 because when we have more than twice as many bulls as bears, I think the message is clear. From my superficial study of it, it seems that there is a lot of feedback loops - that is, survey participants are trying to game their own sentiment.
The Rydex traders, unlike the leverage ETF traders, are running for the hills. According to the ever insightful Jason Goepert, at SentimenTrader.com, the aggregate bull/bear ratio in the Rydex universe of funds is showing an extreme in pessimism:
The Rydex Nova/Ursa ratio, a more traditional metric, is even more extreme and has almost fallen to the lowest level ever (just shy of the low achieved in March 2009).
Mutual Fund Flows
We have the complete data for US mutual fund flows for the month of June 2010. While it seemed for a few weeks as if the bond binge was over, the complete monthly data shows that it is still continuing with $24 billion flowing into municipal (tax free) and taxable bond funds.
Retail investors continued to withdraw their money from US equity mutual funds. But the pace ameliorated with only $8 billion flowing out, compared to $24 billion in May. This combined with anecdotal evidence tells us that the average US retail investor is disgusted with the stock market and simply doesn’t trust it anymore.
I already covered the option markets this week, when I asked “Where’s the Fear?”. Since then, things haven’t really changed, if anything, the option markets are showing even more optimism.
The 10 day moving average of the ISE equity only call put ratio rose to 176 - which is 0.56 if we invert to get a put/call ratio. The CBOE’s put call ratio (10 day average of the equity only ratio) fell to 0.65.
Gold has fallen below its 50 day moving average, where it hasn’t been since March 2010. I continue to see it in a strong technical pattern as it is very close to its highs, relatively neutral compared its several moving averages (that is not extended) and with a surprisingly subdued sentiment.
As a result of the shallow decline, many weaker hands have quickly abandoned gold. The Hulbert Gold Newsletter Sentiment Index has fallen again to just 9.2%. This means that the group of market timing newsletters are on average recommending their clients be long just 9.2% of their portfolios in gold. That is down from 37.8% last month and 47% in May 2010.
To find a lower HGSNI we have to go back to April 2009 (3.5%) when gold corrected 13% after hitting the magical $1000 level. This time however, gold has only fallen 5% from its recent high. As well, the Market Vane bullish consensus for gold is now at 63%. This is the lowest level since August 2009 when gold was trading at $950. Considering that gold is trading much higher and very close to making a new swing high once again, it is not probable that it would be making a major top here with sentiment so far away from extremes (Market Vane’s 90%).
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