Sentiment Overview: Week Of November 28th, 2008

Published December 1st, 2008 in Sentiment Tags: AAII, bearish, bear market, bullish, cboe, investors intelligence, ISE sentiment, Lowry Research, options market, put call ratio, sentiment.

A little late due to a break over Thanksgiving holidays, here is a quick recap of the sentiment landscape for the week:

ISEE Sentiment
The equity only call put ratio from the ISE closed last week at 149, after reaching a high on Thursday of 163. Those readings are just too high to allow for a real bottom to unfold. They show an almost total lack of fear from the retail options traders. And as I showed before, there is a peculiar contraction in the range of ISEE sentiment. We are simply not seeing the wild swings which etched the emotional highs and lows of traders as we used to. What this is due and what it means, I have no idea.

CBOE Put Call Ratio
The equity only CBOE put call ratio was pushed down to 0.56, the second lowest level for the whole year. The lowest was 0.51 in September 2008. That is a lot of complacency. But then again, the options market has not been acting “normal” so it is difficult to interpret it right now.

AAII
The retail investor’s sentiment, as measured by the AAII became significantly more bullish. AAII bears fell to 45% and bulls rose to 31%. This isn’t all that surprising since the survey was taken after the sharp rally that took the S&P 500 ~150 points. But it is disappointing from a contrarian point of view. Had we instead seen a reluctance to believe the rally, then it may have been much stronger.

Investor’s Intelligence
The newsletter editors’ sentiment was little changed: bulls fell slightly to 29% while bears rose slightly to 44%. Not a change that warrants any analysis or carries any portent.

Easy Come, Easy Go
Just to show how steep this recent counter rally was, consider that in mid November there were zero S&P 500 stocks which closed above their short term 10 day moving average. By the end of last week, there were almost 90% which closed above the same. Of course, that was followed by Monday’s crushing fall in all indices.

If you haven’t yet, read my notes from a recent presentation by Lowry Research. Also download the relevant documents from the free trading resource section to follow along with the charts (Reports & Articles folder).