Bearish Sentiment Rises, But Not By Much

Looking over the various sentiment indicators over the weekend, it became noticeable that market bears have not yet moved to position themselves aggressively for more downside. This does by itself of course not mean that the recent market decline will immediately continue, but it is nevertheless noteworthy. Usually most of the indicators shown below travel a bit further before a short or medium term low is put in. What makes this surprising is that the favorite playground of the bulls has recently been especially weak (namely, the tech heavy indexes, such as the NDX).

 

 

The first thing that stuck out was the fact that cumulative net cash flows into Rydex bear funds continue to flatline:

 

 

 

 

 

 

 

 

 

 


 

There has been some selling of the Rydex bull and sector funds, but the bears have decided to stand pat – click for better resolution.

 


 

The NDX, i.e., the market's high beta sector preferred by traders during bullish phases, has been quite weak – click for better resolution.
 

 


 

So we next took a look at a few other data, namely options and futures positioning and surveys. In the options arena, people have begun to buy more puts, but as of yet put-call ratios have not reached levels normally associated with lows.

 


 


The options speculation index by sentimentrader measures all opening transactions across US options exchanges and groups them by bullish and bearish types (e.g. shorting a put will be counted as bullish as will buying a call, and vice versa). It has begun to move lower, but is currently in no-man's land – click for better resolution.

 

 

 


 

The CBOE equity put-call ratio is trending up, but has also not yet reached the region normally associated with market lows (which is indicated by the red dotted lines) – click for better resolution.

 


 

The recent extremes in futures positioning have also reversed, but once again the move is not very big yet. To this it should be noted that the hurricane has robbed us of two day's worth of trading last week – the currently available data are as of October 30.

 


 

The dollar-weighted net commercial position of all stock index futures (inverted) – or put differently, the inverse of the net speculative position.  It has turned, but usually tends to travel further in the new direction – click for better resolution.

 


Surveys have been a mixed bag for a while now. Some still show excessive bullishness (such as Consensus Inc, which shows a bullish consensus of 65%), others such as AAII have indicated the opposite for some time (a lack of bullish enthusiasm).

Of interest may be in this context  that the Hulbert Nasdaq sentiment index (which measures the positioning recommended by stock market newsletter writers) has reached minus 37.5%, i.e., a 37.5% short position is recommended on average. This is quite strange, as it seems that very few people are acting upon this recommendation at this point. Still, it is close to a level where lows have occurred previously.

 

 

 

Charts by: stockcharts, sentimentrader, decisionpoint.


 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

One Response to “Timid Bears”

  • RedQueenRace:

    The SPX 200 DMA was at 1378.93 and rising coming into today. Folks may not get aggressively short until it is broken.

    Friday, the SPX got slapped back at its 50 DMA. It was 1434.46 coming into the day and the SPX topped at 1434.27. This level is worth watching and using for a short with a pretty tight stop if the market tries to rise again.

    Last week while the markets were closed post-Sandy the lowest the ES traded overnight was 1393.00. With the fair value premium at -4.66 coming into today that equates to an SPX of roughly between 1397 – 1398. That level was never seriously challenged when full trading resumed. This level should get tested eventually during a full session but between it and the 200 DMA there isn’t much reason to be positioning for a lot of downside at this point even if the market is going to pull down to those levels.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • What Kind of Stock Market Purge Is This?
      Actions and Reactions Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We'd rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.   Memorable moments from...
  • How to Buy Low When Everyone Else is Buying High
      When to Sell? The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to...
  • US Stocks - Minor Dip With Potential, Much Consternation
      It's Just a Flesh Wound – But a Sad Day for Vol Sellers On January 31 we wrote about the unprecedented levels - for a stock market index that is - the weekly and monthly RSI of the DJIA had reached (see: “Too Much Bubble Love, Likely to Bring Regret” for the astonishing details – provided you still have some capacity for stock market-related astonishment). We will take the opportunity to toot our horn by reminding readers that we highlighted VIX calls of all things as a worthwhile...
  • When Budget Deficits Will Really Go Vertical
      Mnuchin Gets It United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.   Master of the Mint and economy wizard Steven Mnuchin and...
  • Why I Own Gold and Gold Mining Companies – An Interview With Jayant Bandari
      Opportunities in the Junior Mining Sector Maurice Jackson of Proven and Probable has recently interviewed Jayant Bandari, the publisher of Capitalism and Morality and a frequent contributor to this site. The topics discussed include currencies, bitcoin, gold and above all junior gold stocks (i.e., small producers and explorers). Jayant shares some of his best ideas in the segment, including arbitrage opportunities currently offered by pending takeovers – which is an area that generally...
  • Seasonality of Individual Stocks – an Update
      Well Known Seasonal Trends Readers are very likely aware of the “Halloween effect” or the Santa Claus rally. The former term refers to the fact that stocks on average tend to perform significantly worse in the summer months than in the winter months, the latter term describes the typically very strong advance in stocks just before the turn of the year. Both phenomena apply to the broad stock market, this is to say, to benchmark indexes such as the S&P 500 or the...
  • The Future of Copper – Incrementum Advisory Board Meeting Q1 2018
      Copper vs. Oil The Q1 2018 meeting of the Incrementum Fund's Advisory Board took place on January 24, about one week before the recent market turmoil began. In a way it is funny that this group of contrarians who are well known for their skeptical stance on the risk asset bubble, didn't really discuss the stock market much on this occasion. Of course there was little to add to what was already talked about extensively at previous meetings. Moreover, the main focus was on the topic...
  • “Strong Dollar”, “Weak Dollar” - What About a Gold-Backed Dollar?
      Contradictory Palaver The recent hullabaloo among President Trump’s top monetary officials about the Administration’s “dollar policy” is just the start of what will likely be the first of many contradictory pronouncements and reversals which will take place in the coming months and years as the world’s reserve currency continues to be compromised.  So far, the Greenback has had its worst start since 1987, the year of a major stock market reset.   A modern-day...
  • Strange Economic Data
      Economic Activity Seems Brisk, But... Contrary to the situation in 2014-2015, economic indicators are currently far from signaling an imminent recession. We frequently discussed growing weakness in the manufacturing sector in 2015 (which is the largest sector of the economy in terms of gross output) - but even then, we always stressed that no clear recession signal was in sight yet.   US gross output (GO) growth year-on-year, and industrial production (IP) – note that GO...
  • US Equities – Retracement Levels and Market Psychology
      Fibonacci Retracements   Following the recent market swoon, we were interested to see how far the rebound would go. Fibonacci retracement levels are a tried and true technical tool for estimating likely targets – and they can actually provide information beyond that as well. Here is the S&P 500 Index with the most important Fibonacci retracement levels of the recent decline shown:   So far, the SPX has made it back to the 61.8% retracement level intraday, and has weakened...
  • Update on the Modified Davis Method
      Whipsawed Frank Roellinger has updated us with respect to the signals given by his Modified Ned Davis Method (MDM) in the course of the recent market correction. The MDM is a purely technical trading system designed for position-trading the Russell 2000 index, both long and short (for details and additional color see The Modified Davis Method and Reader Question on the Modified Ned Davis Method).   The Nasdaq pillar...   As it turns out, the system was whipsawed,...
  • Market Efficiency? The Euro is Looking Forward to the Weekend!
      Peculiar Behavior As I have shown in previous issues of Seasonal Insights, various financial instruments are demonstrating peculiar behavior in the course of the week: the S&P 500 Index is typically strong on Tuesdays, Gold on Fridays and Bitcoin on Tuesdays (similar to the S&P 500 Index).   The quest for profitable foresight...[PT]   Several readers have inquired whether currencies exhibit such patterns as well. Are these extremely large markets also home to...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist