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Tuesday, January 22, 2013

Current sentiment picture

To say that bullishness is rampant is an understatement.  Lets look at some charts.


The lower panel is the RYDEX bearish URSA fund assets.  We are at the lowest levels on this chart that goes all the way back to 2007.  Does that look like everybody is bearish to you?  Of course some of the money that used to be in this fund could be in ETFs.  Lets look and see.


The inverse ETF assets are at the lowest levels on the chart that goes back to 2010.  No bears there.

This is newsletter writers opinions on the NASDAQ.  I have never actually seen this one before.


Despite the lower high in the NASDAQ the sentiment is more bullish then it was at the peak.  Will the optimism be rewarded or is it unfounded?


It looks like hedge funds have the most net long exposure since 2006.  Combine that with this statement.

Hedge funds are borrowing more to buy equities just as loans by New York Stock Exchange brokers reach the highest in four years, signs of increasing confidence after professional investors trailed the market since 2008.
Leverage among managers who speculate on rising and falling shares climbed to the highest level to start any year since at least 2004, according to data compiled by Morgan Stanley. Margin debt at NYSE firms rose in November to the most since February 2008, data from NYSE

So it would appear the hedge fund managers are long.  Not only that, they are leveraged long.  The most leveraged to start a year in many, many years.  So much for the theory that hedge funds will drive the market higher chasing returns.  They are already in.

The normal sentiment surveys I show are still on the bullish side.  Here is the latest NAAIM survey.


The NAAIM survey was only fractionally higher this week.  That came out before yesterdays upside move.  Did they pile in some more then?  It is clearly at historically high levels.  Will there be an itch to book some profits if the market stalls or turns down?  It has not stayed this high for very long in the past.  Is there anybody left to buy if they decide to pullback?

Here is the latest II survey.


There was another uptick in the number of bulls and a drop in the number of bears.  The bulls are getting into the highs of the last two years now.  I think this qualifies as frothy.

Lastly is the AAII survey.


There was a small down tick in the number of bulls this time.  This one is not nearly as high as the other surveys are.  However, this survey is not a great contrarian survey.  This survey is usually below 50 before downturns.  At 43 now, it is in the normal range of a top.  It would probably be more of a bullish signal if it was over 55 since the market almost always goes some higher when it gets that high.  The last time it got that high was in late 2010 and it worked out pretty well for them.

We have a leveraged long market with very few bears anywhere.  Even people that normally have a bearish bias are telling me this market is going higher.  There is a guy on Bloomberg that wears a white and black spotted jacket that looks like a cow.  He was on the TV the other day telling me the market was going higher.  He is normally very skeptical and usually talks about when he would be shorting.  The last time I heard him telling me the market was going higher was in Sept.

We are effectively in a trading range since the Sept. high.  Some indexes have broken out and some have not.  However, the sentiment is clearly very bullish already.  This is consistent with a market making a top.
Will the lagging indexes break out, or will the break outs fail?  I think the jury is still out on that and I am sure I am in a minority.  In my experience that is usually when I am right, LOL.  My mistakes usually come when I am in the majority.   I said in the daily update the other day if the Dow and the COMPX can break out I will be become a bull.  Until that happens I remain a skeptic, LOL. 


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.