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Friday, April 12, 2013

Current sentiment

I am a bit at a loss for words on this one.  Check out the latest AAII sentiment data.


Sorry, my usual source has not updated the charts with the latest data yet.  The bearish number jumped from 28% to 54% while the bulls dropped to 19%.  This happened while the Dow is at all time highs and SPX broke out to an all time high.  Did last weeks employment report cause that reaction?  I find this absolutely amazing and unlike anything I have ever seen before.  Is this a great contrarian indicator of more upside or a huge warning signal.  I have commented in the past about how this survey is not exactly easy to use.  Sometimes they are right and somethings they are wrong.  They are usually between 35% and 45% bulls at important tops.  They are almost always the least bullish of any of the surveys that I follow at tops.  I don't know if this is a positive or negative for the market, but I would say it is a positive sign for a big move.  If the market keeps going up they will have to capitulate at some point and pile into the market.  If the market heads south and confirm their thoughts it seems likely they will do some selling.  Maybe more selling then usual on a first leg down in a correction.  It is definitely very curious.


The NAAIM survey has come down some from the peak.  It is still elevated relative to the last two years though.  There clearly has been some profit taking over the last few weeks.  There is now a little upside fuel, but will they pile in at these extended levels?  Should something spook these guys there is quite a bit of downside fuel.

Here is the II sentiment survey.


The number of II bears ticked up a bit lately, but from extremely low levels.  They stayed unusually low all last year and were correct.  If they continue higher that could be a sign we are starting a pullback, but it is too soon to tell yet.


The latest Nova/Ursa ratio shows a little spike up on this rally.  Not nearly the strength we saw off the Feb. or Dec. lows.  The 14 DMA has diverged with price over the last few weeks similar to what happened at the Sept. top (blue circled area).  However, it did the same thing in July and Aug. without making an important top.  I can say that so far this thrust up is considerably weaker then the thrust into that Sept. high (peak just prior to the blue circle).  Is there more thrust to come in the next few days or is that it?  If it does not get much higher then it is now it would be the weakest it was at a time when SPX got above its upper Bollinger band.  That remains to be seen as it could easily climb higher.  The 14 DMA is pretty low though so that is a bit of a warning sign.  This gets updated daily so I can keep an eye on it and see what happens.

All surveys are showing a reduction in bullishness.  The AAII survey is the only one that is truly unusual for the current market position though.  Only time will tell what that means.


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