Here’s a quick snapshot of this week’s sentiment landscape:
Of the usual sentiment surveys this one is showing the most froth at almost 54% bullishness. The II bears have been quickly reduced to less than 30%. This is a very quick and very sharp about face.
Not the usual sentiment indicator but a worthy market barometer: the CBOE equity only put call ratio is at 0.53 and that’s just too high. The option market is too euphoric for the rally to continue much longer. As I already mentioned yesterday, it is time to sell something into this strength (if you have a short term time horizon). The time to scoop up shares was when the put call ratio was above one.
Last weekend’s Barron’s had this tell regarding sentiment in the blocked fixed income market:
More than one quarter of the news-articles citations of “ABCP,” for asset-backed commercial paper, since 1993 have occurred in the past six weeks, according to the Factiva Database.
Usually when everyone and their cousin is talking about something, it has played itself out and the opportunity or trend is over.
Hulbert Stock Newsletter Sentiment
The Hulbert Stock Newsletter Sentiment Index, as of the close of trading on Tuesday September 18th, stood at just 17.4%. That’s a puny 3% point increase for a day which gave us the breathtaking 330+ point rally in the Dow Jones Industrial. Even more telling, the most recent HSNSI reading is much lower than in mid-July, when the stock market was much higher and close to 14,000. During that attempt, the HSNSI got as high as 50.9 %.
Commitment of Traders
I’ve described the ginormously long commercials position again and again. This week brings yet another increase in their long position as they continue to increase their bets of a continued market rally. I find this either the most bullish sign out there or the most elaborate mirage. The intensity and single-mindedness of this tell is alarming. If this is a mirage, what other explanations can there be? What am I missing?
“Bin Laden” Trades
So what happened to all those breathless conspiracy articles about a doomsday trade of gigantic proportions? a multi-million dollar derivative bet that the market was going to crash? As the market rallied, the silence is deafening. What a perfect illustration of contrarian sentiment and how by zagging when others zig, one stands to make money.
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