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Sentiment Overview: Week Of June 6th, 2008 at Trader’s Narrative

Sentiment Surveys
No significant change within the usual sentiment surveys. Both the AAII and II moved just 1% points: the AII going to 47% bulls from 46% and the Investor’s Intelligence bullish percent from 45% to 46%.

Hulbert Newsletter Sentiment
According to Mark Hulbert, out of 10 market timing newsletters with the best risk adjusted performance, seven are bullish right now. Among the ten, their average equity allocation is a whopping 78%! This is especially meaningful when compared with what the worst market timers are saying: an equity allocation of just 11%.

So unless you think that all of a sudden the pattern of performance is going to be upended, this is a very bullish sign for the market.

isee sentiment data june 2008ISE Sentiment
We got a surprising uptick in the ISE Sentiment index this past week. On Thursday it peaked at 192. To provide some perspective, on October 8th, 2008 the ISE sentiment index reached 279 and on October 29th 2008 it reached 275. The October swing high of around 1560 was put in between these two dates.

And finally in mid May, when the market made its swing top, the ISE sentiment was 225. We didn’t really approach record highs for this measure but usually anything around 200 shows significant risk aversion (the ISEE sentiment is a ratio of calls to puts).

LowRisk Sentiment
A few people contacted me asking about LowRisk and as I mentioned before I haven’t received any response from Jeff Walker after inquiring about LowRisk. Their site continues to be stuck on March data with no updates as of yet. Unfortunately, it looks like this sentiment measure is no more.

So more or less we continue to muddle through with lukewarm sentiment on average. I continue to see the March bottom however, as significant and these counter currents we’ve seen lately don’t necessarily negate that.

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5 Responses to “Sentiment Overview: Week Of June 6th, 2008”  

  1. 1 Maverick


    Do you know what the equity allocation% of the 10 market timing newsletters with the best risk adjusted performance was in October 2007 and later December 2007.

    It would be interesting to know what their equity allocation% was at the peaks prior to the market downturns.


  2. 2 Babak

    Maverick, I’d have to double check but I suspect they were less bullish, but bullish nonetheless (as opposed to totally bearish). These market timers don’t try to catch every twitch and turn but rather the much larger major trends.

  3. 3 Maverick


    On the flipside, it would be interesting to know the equity allocation % of the top 10 market timing newsletters during the recent market bottoms on 1/18/08 and 3/20/08.

    One would assume that the equity allocation% would be more bullish during market bottoms so it would be interesting to see if the readings were greater than the current reading of 78% during those dates.


  4. 4 Mark Young

    Here’s the options sentiment set up for 6/11:

    Equity P/C ratio: 0.81. Buy.
    OEX PC ratio: 0.88. Weaker Buy.
    OEX 10-day PC ratio: 1.18. Neutral.
    OEX $-weighted* P/C ratio: 2.64. Buy.
    QQQQ $-weighted* P/C ratio: 1.23. Neutral.
    ISEE Sentiment Index: 74. Buy.

    Lazlo Birinyi reported that Bulls were at 18.18% and Bears were at 50.00% in his poll. Many more Bears than Bulls, and that’s solidly Bullish.

    Over on Traders-Talk (I’m affiliated with that site, too), the Weekly Fearless Forecaster poll had 57% Bears. The problem is, short term, there were too many partially long Bulls. That indicated that there are too many weak handed Bulls in the market, which “someone” is almost always willing to exploit.

    I’d say we’ve got a set up for a low, soon, but weaknes may be first.

  5. 5 Babak

    Mark, thanks for the extra info. Your reference to La[s]zlo Birinyi, I assume is regarding the Blogger Sentiment Poll at tickersense. When it comes to that sentiment measure, I’m not convinced it has any edge at all.

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