Posts Tagged ‘investor sentiment’

AAII: BULLISH SENTIMENT HITS 6 YEAR HIGH

Courtesy of The Pragmatic Capitalist

This morning’s AAII sentiment survey is consistent with just about every other sentiment reading of late – investors are wildly confident that stocks will be higher in the coming 6 months.  The optimism is almost near universal. The following chart tells the story of this bi-polar market.  On August 26th, just days before the market bottom, the bullish sentiment hit just 20.7% – no one thought stocks were set to rise.  Now, after a 20% rise in equities the consensus is uniformly positive.

Charles Rotblut of AAII elaborated on this morning’s results:

“Bullish sentiment, expectations that stock prices will rise over the next six months, rose 13.1 percentage points to 63.3% in the latest AAII Sentiment Survey. This is the highest level of optimism since November 18, 2004. This is also the 16th consecutive week that bullish sentiment has been above its historical average of 31%, the longest such streak since 2004.

Neutral sentiment, expectations that stock prices will remain essentially flat, declined 2.3 percentage points to 20.3%. This is a six-week low for neutral sentiment and the 20th consecutive week that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 10.7 percentage points to 16.4%. This is the lowest level of pessimism since July 14, 2005. It is also the 11th time in the past 12 weeks that bearish sentiment has been below its historical average 30%.

The spread between bullish and bearish sentiment is currently at +46.9 points. This is the most positive bull-bear spread since April 15, 2004, when it reached +50.0 points. A wider differential was recorded on March 5, 2009, when the bull-bear spread fell to -51.4 points.

Bullish sentiment is more than two standard deviations from its historical mean, making it a statistical outlier. In simpler terms, bullish sentiment is running red hot. In fact, the current reading is the 18th highest since the survey started in 1987. Higher readings were recorded in 1987, 2000, 2001, 2003 and 2004. Such high levels of optimism have been correlated with a decline in the S&P 500 over the proceeding 24 weeks, though the magnitude of the declines have varied.  A spreadsheet showing all of the survey’s historical data is attached.”

Source: AAII 


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BULLISH SENTIMENT STILL EXTREMELY HIGH

The Pragmatic Capitalist notes that BULLISH SENTIMENT STILL EXTREMELY HIGH. – Ilene 

Courtesy of The Pragmatic Capitalist 

The latest investor sentiment surveys show continued levels of high bullishness.  This week’s AAII sentiment survey showed another increase in bullish sentiment to 49.7%. Charles Rotblut of AAII detailed the results:

“Bullish sentiment rose 2.3 points to 49.7% in the latest AAII Sentiment Survey. Optimism among individual investors that stock prices will rise over the next six months remained above its historical average of 39% for the 13th consecutive week.

Neutral sentiment, expectations that stock prices will be essentially unchanged over the next six months, fell 3.8 percentage points to 24.1%. This was the 17th consecutive week that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.5 percentage points to 26.2%. Pessimism has been below its historical average for 10 out of the last 12 weeks.

Though the markets have been volatile on a day-to-day basis, the S&P 500 is at approximately the same level it was at the start of November. The ability of stocks to hold onto their gains despite fears about U.S. monetary policy and European sovereign debt problems is helping individual investors remain upbeat about the short-term prospects for stocks. It should be noted that our November Asset Allocation Survey showed AAII members increased their allocations to stocks and stock funds for the fourth consecutive month.

As stated above, bullish sentiment is above its historical average for the 13th consecutive week. This is the longest streak of above-average readings since 2004, when bullish sentiment stayed above its historical average for 19 consecutive weeks. What happened afterwards? Stocks were volatile, with the S&P 500 falling by more than 75 points, but six months after the streak ended, the large-cap index was essentially unchanged.”

The Investor’s Intelligence survey is showing similar high levels of optimism.  This week’s reading was down marginally from last week to 55.4%, but remains well above historical norms:

Source: Investor’s Intelligence, AAII


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ONE OVERVALUED MARKET?

ONE OVERVALUED MARKET?

Courtesy of The Pragmatic Capitalist

A recent research note from Gluskin Sheff’s David Rosenberg highlights the high valuation, high sentiment, and technicals  of the equity markets to highlight the bearish case:

  • Fully 85% of S&P 500 stocks are now above their 50-day moving averages, and;
  • The median P/E multiple is now a whopping 22.2x.
  • The degree of bullish sentiment in the latest Investor Intelligence Poll is a huge 72%;

Of course, much of this has been the case throughout the rally. While the technicals appear somewhat extended this is not unusual during a major market rally.   As we can see in the chart below, stocks have been well above their 50 day moving average for much of the rally and this has not served as an impediment:

50ma ONE OVERVALUED MARKET?

As for earnings, we all know my thoughts here.  Earnings hit such a deep trough and estimates spiked so low that this has actually been fuel for the fire.  It might sound counter-intuitive, but the trough in estimates actually led to very poor earnings expectations which has fueled the rally higher.  As we’ve explained before, using the PE ratio to time investment decisions is a recipe for disaster.  The PE ratio is nothing more than a moving price target (which rarely reflects the true market value) divided by the guesstimates of the analyst community.  If we’ve learned one thing over the last 6 months it is that analysts can’t guess their way out of a wet paper bag.  The result is, in my opinion, one of the most misleading and overused investment indicators of all time.

In terms of sentiment we continue to see conflicting messages.  While the Investors Intelligence poll remains overly bullish we continue to see bearish data from the CFTC’s commitment of traders report, neutral data from the AAII and neutral data from State Street’s Institutional Money poll.  Cherry picking one report doesn’t mean sentiment is overly bullish.

There are real fundamental reasons to worry about the long-term viability of this rally, but these three should be taken with a grain of salt for now.

 


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Looks Like S&P Equity Anlaysts Are As Competent As Their Debt Analysts…..

Looks Like S&P Equity Anlaysts Are As Competent As Their Debt Analysts…..

Courtesy of Jan-Martin Feddersen at Immobilienblasen

This kind of expertise from Wall Street Finest based only on hope of a better bailout deal ( proposed from a major sharholder…. ) sums the market action up….. At least S&P isn´t able to play the Pump & Dump like Goldman & others…. Keep in mind that AIG is one of the Zombie Stocks making up to 20 percent of daily NYSE volume…..

Diese "Expertenmeinung" die einzig und allein auf einem noch besseren Bailoutdeal ( passenderweise vorgeschlagen von einem der Hauptaktionäre ) basiert spiegelt recht schön wider was momentan an den Märkten abgeht…..Immerhin kann man S&P nicht wie z.B. Goldman vorwerfen das altbekannte Pump & Dump zu praktizieren…. Man sollte sich zusärtlich noch ins Gedächnis rufen das AIG eine der Zombie Aktien ist die momentan für knapp 20% des täglichen Handelsvolumens stehen…..


AIG Shares Shoot up on Proposal to Ease Government Loan Terms MarketBeat

AIG jumped roughly 11% today after the powerful House Oversight and Government Reform Committee confirmed receiving a proposal from former CEO Maurice “Hank” Greenberg to restructure the government’s bailout of the insurance giant.

The reports prompted S&P Equity Research to boost AIG to “hold” from “sell.”

We see this news buoying the shares near term,” S&P’s Catherine Seifert wrote in quick squib earlier today. But before you sink the kid’s college fund into AIG shares, keep this in mind:

It’s far from clear that there’s actually any actual equity value in this company.

“We note June 30 tangible common equity was minus $261.66 per share,” Seifert states

Needless to say that according to Yahoo Finance there is no sell rating (10 hold) on AIG…..;-)

UPDATE: Traders Seek Fortune in AIG, a Stock Once Left for Dead WSJ

 


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SENTIMENT UPDATE – INVESTORS ARE COMPLACENT

SENTIMENT UPDATE – INVESTORS ARE COMPLACENT

Courtesy of The Pragmatic Capitalist

Earlier this week we mentioned the sharp change in short interest over the prior months.   I wrote:

Much of the fuel for the 50% rally in the S&P 500 has come from short covering.  The general skepticism surrounding the recovery has actually resulted in price gains.  But as the rally gets long in the tooth we could be seeing signs that short covering will have a much smaller impact.

The huge declines in short interest are a sign of capitulation in short selling.  The bears have been truly slaughtered during this bull run.  The change in short interest should be viewed as a contrarian indicator at this juncture.  This is also a clear sign of a major change in investor sentiment.

In addition to major changes in short interest, this weeks AAII poll displayed a remarkably bullish reading of 51%.  We haven’t seen a reading this high since May 2008 just after the government intervened in Bear Stearns and the market rallied.  At the time, everyone was bullish and was declaring that a recession was off the table and a second half recovery was a near certainty.  Of course, when everyone is on the same side of the boat, it’s wise to either move to the other side or simply jump off.  The bullish side of the trade, in terms of sentiment is incredibly crowded.  Positive sentiment can remain high for extended periods of time and can be a major driver in higher prices, however, these environments make for very poor risk/reward scenarios.  If any element of doubt or uncertainty creeps into the market we could easily see a sharp and dramatic correction.

AAII

 

 


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Phil's Favorites

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Brexit: wisdom of crowds proves effective predictor of Britain's chaotic EU departure

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Aussie Dollar About To Send Bullish Message To Precious Metals?

Courtesy of Chris Kimble.

The Australian Dollar and its ETF (NYSEARCA: FXA) have traded sideways for much of the past 4 years (see blue shaded area on chart above).

And since the Aussie Dollar and precious metals are highly correlated, this hasn’t helped gold and silver.

But this setup may be changing soon as a big test comes into play for the AU$.

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Read more about our latest Cannabis News! CANNABIS HOME Gainers
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Bitcoin Breaks Back Below $10k, Crypto-Crash Accelerates As Asia Opens

Courtesy of ZeroHedge. View original post here.

Update 2010ET: Having briefly stabilized after this morning's weakness, cryptos are tumbling once again as Asian markets open.

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Reminder: We're is available to chat with Members, comments are found below each post.

 

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A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

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Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

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The GLD very wide channel shows us the way.
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Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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