Trader’s Narrative

This week’s sentiment overview is a challenging one to write because every indicator I look at is either stuck in neutral, lukewarm or middle of the road. The market isn’t giving us any clear edges. I’ll do a quick run down to show you what I mean:

Sentiment Surveys
As I mentioned, the Investor’s Intelligence sentiment survey continues mired in neutral with 37.8% bulls and 40% bears. Things haven’t moved for 3 weeks.

ISEE Sentiment
Not to be outdone, the ISEE Call/Put index ended the week at 101. Which means that retail traders were completely balanced in their preference for puts and calls.

Volatility Index
Neither the VIX and the VXN index are giving any cause for concern. Their nominal levels, 23 and 27, can be argued to be “high” but certainly not high enough. Their relative levels are also lukewarm.

The VIX is only trading at 6% above its 50 day moving average and the VXN at 4% above. To put that in perspective, recently in mid-July, both of the volatility indices spiked to more than 20% above their 50 day moving averages.

Conclusion
Putting together the neutral sentiment indicators with the weak technical picture and the historically bearish month of September, gives an unmistakable signal that this is not the time to be a buyer. In fact, it is time to sell and sell short.

A conclusion which is echoed by perhaps the savviest market participants, corporate insiders. According to the latest data (the ratio of insider buying to selling activity) executives are not at all enticed by the cheaper stock prices.