Trader’s Narrative

It seems we’re treading water until Thursday 2:10 pm. Eventhough it is highly unlikely that we’ll get anything other than a 25 basis point hike, the market doesn’t seem to want to make a move. It feels like we’re all stuck in a bad production of Waiting for Godot.

I’m getting a bit impatient since the market doesn’t seem to want to make a move up out of this technical oversold level. According to the latest data (which is two weeks old) from the NYSE, public short sales - as opposed to specialist short sales - are at their highest levels since September 2001. As well, retail traders are piling into puts pushing the put/call ratio into a bullish extreme. On the sentiment side, the surveys continue to show a lot of bearishness. The four week moving average of the AAII bull ratio (bulls divided by bulls plus bears) is at levels last seen in the 1998 bottom, the late 2002 and early 2003 bottom and the April 2005 bottom. And yet, here we are; meandering with a mazy motion.

I know that sentiment isn’t everything and I could be missing something big. For example, I read things like this and I get a bit antsy. Or I think about the Michigan Consumer survey and remember that although it has fallen, we have yet to see a concomitant fall in the stock market. Then I remember that we are smack dab in the middle of 2006 which is the cusp of the powerful four year cycle. If you believe in that sort of thing, you expect a major low to be put in sometime this year:

And then I think, if I’m feeling this fretful, then probably so are thousands of others. Why, even a veritable institution like Lowry’s is second guessing itself and its research on 90-90 days!

So either I stop over-analysing everything and take a few days off or trade intra-day setups which do not key off general market conditions. Hmmm…