Market Sentiment 01 (Dec 09 - Sep 10)

[winston]

SMALL INVESTOR BULLISH SENTIMENT SOARS TO 3 YEAR HIGH by TPC

Small investor sentiment has soared to new 2010 highs and hit levels not seen since August 2009 when stocks had rallied 50% off the March 2009 lows in a near straight line.

To the small investor there is little that can go wrong with equities now. We have seen just six prior readings approaching 50% in the last three years and in four of those cases stocks traded lower by an average of 14% within the next two months.

The two exceptions to the rule were during the 2009 bull market when stocks were invulnerable. Charles Rotblut of AAII added some more color to today’s data:

“This was the third consecutive week that bullish sentiment has made a big increase. Since falling to 20.7% on August 26, bullish sentiment has rebounded by approximately 30 percentage points. At the same time, bearish sentiment has plunged by approximately 25 percentage points.

Two factors are at play. The first is the market’s recent rebound. The rise in stock prices is giving some investors hope that a short-term bottom in the market has been formed.

The second is the reduction in chatter about potential deflation and a double-dip recession. Though the economic data has not been great, it has been good enough to give some assurance that recovery is continuing.”

The Investor’s Intelligence survey continues to lag the AAII poll substantially. At just 36.7% the reading is far less bullish:

Sources: AAII, II


http://pragcap.com/small-investor-bulli ... -year-high?

[winston]

Wall Street 'casino' spooks small American investors

Michael McCaslin is wary of investing his retirement funds in Wall Street. Its volatility and cryptic trading techniques make him feel lost and unsafe, he says.

"I tried to watch the market over the past couple of years, and you're just lost. I look at the market now and it's like Las Vegas, it's a gamble," the 65-year-old pensioner said.

Like most Americans, McCaslin has his retirement saving plan, known as a 401k, invested in stocks. Most of his funds are handled by an investor, but he manages 10 percent of the money himself from his home in Greenville, Texas.

Yet the extreme instability that has characterized the markets since the 2008 financial meltdown, often blamed on highly speculative trading, and the increased use of super-fast automated trading systems make Wall Street a tough environment for small investors.

And as a result, more Americans have fled the stock market in recent months.

After seeing his portfolio lose 40 percent last year and rise back to a smaller 10 percent loss in 2010, McCaslin has little trust in Wall Street, the emblem of US capitalism.

"Wall Street is, in my view, a bunch of greedy people who control a lot of money with large investment companies who can manipulate the market," he says.

"I don't have that ability, I am at the mercy of these people and with their automatic trading and the other things they can take advantage of, I don't know what can happen to the market because, you know, it can happen in milliseconds with the automatic trading," he said.

Often known as high frequency trading (HFT), the ultra-fast algorithms buy and sell millions of shares a day, executing deals within split seconds. They today account for more than 50 percent of daily trading volume.

HFT has come under increased scrutiny and criticism following the May 6 "Flash Crash" which saw market indexes dive by more than nine percent in minutes, only to rebound again after seconds.

The stock exchange's extreme volatility and complexity leaves average investors scared.

"The people who are not quite professionals but not quite buy and hold investors... have just been killed and frightened," said Mace Blicksilver of Marblehead Asset Management.

According to Marc Pado, analyst at Cantor Fitzgerald, "For an individual losing 10 percent of their retirement in a single day is just stunning to them. Stunning."

Now McCaslin would like to minimize his investment in shares, but says that the other, safer, investment options simply don't yield enough profit.

"I don't know where to put the money. You can't put the money in bonds because they don't pay anything and I can't put it away for long term, because I won't be around long-term, so I am kind of in a limbo.

"I am at the mercy of the market if I want to get returns."

Even savvy traders find it almost impossible to master the stock market as trading increasingly becomes dominated by machines and fractured by a myriad of highly specialized and often little-known markets called black pools.

"How can I compete with a computer system that can put in 200, 300 trading orders in a second?" asks Troy Hanninen, a professional individual investor who works from his home in Missoula, Montana.

If Hanninen wants to buy stock at 35 dollars a share, computers will get them a fraction of a second before him at 34.999 dollars, he says.

"Ever since the domination of the computers came out, you have many individual traders like me struggle because of the ability of high frequency traders to sub-penny us... that issue has driven liquidity from the market."

McCaslin and Hanninen reflect concerns voiced last week by the head of the US government stock market watchdog that individual investors have been turning away from equities in recent months.

Many individual investors "have submitted comments to the Commission that are highly critical of the current market structure, said Mary Schapiro, chair of the Securities and Exchange Commission (SEC).

"Retail broker-dealers have told us that their customers -- individual investors -- have pulled back from participating in the equity markets since May 6," she said.

The SEC's website has been flooded by letters from angry and frustrated investors in recent months.

"I recognize that there may be a variety of reasons for reduced participation in the equity markets, but the trend is troubling, particularly if concerns about equity market structure are playing even a small role in investor decision-making," Schapiro said.

The SEC is set to release its report on the Flash Crash this month, which will likely include measures to strengthen the stock markets, most notably by regulating high frequency trading.

Source: AFP American Edition

[winston]

US MARKET SENTIMENT


VIX: 22.01; +0.29
VXN: 22.26; +0.45
VXO: 20.7; -0.26

Put/Call Ratio (CBOE): 0.89; +0.07


Bulls versus Bears:

The CROSSOVER from the prior week reverted, but the bulls and bears are still close together. That crossover is a bullish indicator, and the market has rallied off of it. Question is, did it generate the momentum for a range breakout?

This is a reading of the number of bullish investment advisors versus bearish advisors.


Bulls: 36.7% versus 33.3%. Another sizeable jump from 29.4% the week before. Back above the 35% threshold, below which is considered a bullish indicator. This dulls some of the recent upside, bullish bias. Again, to be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 31.1%. A modest slip from 32.2% versus the big drop from 37.7% the week before that. Back below the 35% level, above which is considered bullish.

Source: MarketFN.com

[winston]

Everyone is smiling and joking on CNBC again.

The US has provided a positive lead for everyone to take risks again.

Even the perma bears are wondering whether they should jump back in again, even after the market has rebounded strongly

Have a look at the stuff that's moving in Spore and HK. 3/4 of the names there, I dont hear too often...

[winston]

SENTIMENT UPDATE – THE BULLS ARE BACK! by TPC

The bulls are back! All it took was a stock market rally for the bulls to realize that the world wasn’t ending.

Of course, as they were pessimistic at the bottom they’re now optimistic after a huge short-term move in stocks.

According to the AAII bullish sentiment declined a bit this week, but remains firmly in excessively bullish territory:

http://pragcap.com/sentiment-update-the-bulls-are-back

[winston]

MARKET SENTIMENT

VIX: 21.71; -2.16
VXN: 22.72; -1.54
VXO: 20.39; -2.36

Put/Call Ratio (CBOE): 0.84; -0.1


Bulls versus Bears:

The CROSSOVER from the prior week reverted, but the bulls and bears are still close together. That crossover is a bullish indicator, and the market has rallied off of it. Question is, did it generate the momentum for a range breakout?


Bulls: 41.4% versus 36.7%. Continuing to jump higher 4 to 5 points a week for the past month. Investment advisors are getting more bullish but the investors they are advising are not, and without their money, not as much ammunition.

We will see if this rally drags more money back to the stock market. Back above the 35% threshold, below which is considered a bullish indicator. Again, to be seriously bearish it needs to get up to the 60% to 65% level.


Bears: 29.3% versus 31.1%. Falling back below 30% for the first time in four month, continuing the decline from 37.7% four weeks back. Further below the 35% level, above which is considered bullish.

Source: MarketFN.com