Trader’s Narrative

Things are finally falling into place and I’m feeling less dazed and confused.

Mark Hulbert reports that newsletter sentiment has fallen so much that short term market timing newsletter editors are now recommending a 12.3% short position to their clients. This is heartening for the bulls because for a few days newsletter bullish sentiment actually went up as the market declined. So it’s good to see real bearishness out there as a contrarian.

Trader Mike reported yesterday on his esoteric “search engine” indicator. Apparently, quite a number of people are finding his blog by typing in the search strings related to short selling. I find this hilarious. And it does dovetail nicely with the spike we’ve seen in odd lot short sales.

As well, the troubling COT report that I previously mentioned has now improved. The retail traders (dumb money) liquidated their big net long position and the commercials (smart money) covered a big chunk of their net short position.

And finally, here’s an interesting data point from Jason Goepfert: “Less than 10% of total assets in the Rydex mutual fund family is concentrated in technology funds, a level that has equated well with previous lows in big tech stocks. Overall, Rydex traders are positioned about as defensively as any time over the past few years.”