Current sentiment picture

Here is a look at the latest Nova/Ursa ratio.

Source

The ratio had a significant spike down the last few days into a short term over sold condition.  It bounced back yesterday, but is still below 0.  The 14 DMA is still above the zero line, but is headed south.  Will it cross and suggest a correction is on, or will it turn back up? 

Here is the latest NAAIM survey.

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The NAAIM survey has come down to 69 as some people have taken some profits.  It is still high relative to the range of the last two years.  Since they are lowering exposure it probably would take some good news event to get them to pile in again.  If they continue to take chips off the table it would be a drag on the market.

Here is a chart I have never seen before of the NAAIM data.

 Source

This is from the article.

According to the NAAIM survey, fund managers held record net long exposure to US equities in early parts of 2013, exceeding that of 2007 peak. Moreover, when we measure the intensity of these positions (number of managers long including their leverage minus number of managers short including their leverage), we can see that fund managers have been bullishly over-leverged in recent months. Similar conditions were seen in mid 2011, prior to a August market crash.

The intensity of longs as the author put it is quite an interesting way to measure enthusiasm.  Despite the big rally last year the intensity never reached the levels it did in 2010 and 2011.  The biggest move down last year was quite a bit smaller then in the prior two years.  However, this year is different.  It would appear there is some risk of a bigger correction then we saw last year.  The indicator has rolled over significantly already.  That could indicate the market has peaked for now.

Source

This survey shows the number of bulls dropping and bears rising.  The tide of sentiment is turning some, but not enough to say we are in a correction yet.

At this point there is still more fuel on the downside then the upside.  However, sentiment has cooled enough that some really good news could cause some renewed bullish enthusiasm.  It does not look like that good news is going to come from earnings unless they get much better as we go along.

Bob