Comments on: Sentiment Overview: Week Of October 23rd, 2009

by: Avi

Mon, 26 Oct 2009 02:35:24 +0000

babak

take a look at the number of S&P stocks over their 50 day MA… not confirming recent highs at all

by: dacian

Sun, 25 Oct 2009 10:22:22 +0000

burt, back in March the market was cheap; it’s not the case anymore. The market is not very expensive if we would be in a normally functioning economy; but we’re not, the economy is quite weak by a lot of measures. So given the environment, the market is not cheap here. It could go much higher, that I don’t know. But because you speak about value, while there are some companies out there (small caps) which are ignored by computers (because they are quite illiquid) I can’t really find any value.

Now regarding retailers; these people are herding (trend followers). So they can’t be wrong all the time; as far as the trend persists and they go with the trend, they are correct. Retail people are wrong at market turns. But professionals are wrong as well sometime. So the statement: the market will go higher just because the retailers are not in yet is not solid enough.

Again, I have no clue where the market goes from here; imo, the risk is quite high (the market is not cheap and there are still many problems with too many people betting the FED will sort out things like magic). I’m for one neutral here (hedged) and not buying.

by: burt

Sun, 25 Oct 2009 00:22:37 +0000

One of the things I like about this blog is that it puts some thought into the sentiment indicators, rather than just making pronouncements from obvious data. (”Retail is bearish! Buy!”) Whoever it is who writes this, thanks a lot.

I believe that the reason retail lost so much in the past decade is not manipulation, but simple ignorance of value. Bluntly, you didn’t have to be an insider to know that tech stocks in 2000 or CDOs in 2006 were overvalued. You just had to have reasonable business common sense, and the willingness to do your own work rather than listening to the media. Likewise you didn’t have to have any particular in to realize that SP500 at 666 had real value. Those are the kind of decisions that make the real money in the market.

However most of the time the decisions are not that clear. For now, my models are indicating a 5% return for the next 10 years. Worth the risk? Probably. But really, this is the time for smaller positions and tactical trading. That’s where a blog like this comes in.

Also, forget the specialists. They are in the process of being destroyed by the computers. Good riddance.

by: dacian

Sat, 24 Oct 2009 18:28:53 +0000

burt, that we don’t know. You might be right. But by now, unfortunately for those you call “smart money”, eventually the stupid who’s wrong all the time will realize how fraudulent the game is. That’s why I said that it might not work this time.

And just for the sake of argument, you need to show me a graph with smart money. Because I’ll show you one which shows that smart moeny (calculated as “public to specialist short ratio” “specialist short to total short ratio” “SP100 option traders”) is neutral since July, while they were very bullish in March.

If your read this blog regularly, you will see that retail investors are actually rather bullish (CPOE call ration touched 200 as shown in the article). Why also might count this time is that those stupid retail people might not have money this time to “gamble” in stocks.

by: burt

Sat, 24 Oct 2009 15:20:32 +0000

Dacian - that’s exactly why this market is going to keep going up. The retail investor is always wrong.

by: dacian

Sat, 24 Oct 2009 13:31:00 +0000

Regarding retail investors, I already said here and keep thinking it’s true: the last 2 bubbles fooled many, it’s very unlikely it will happen 3rd time. The more they push (you all know who), more we hoard.