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coolhand's Account Talk
- Thread starter coolhand
- Start date
coolhand
Well-known member
I should also point out that just because the market rallied hard the past week and they (NAAIM) were bearish, does not necessarily mean that they were collectively wrong (outside of the short term). Even for smart money it can sometimes be impossible to time an expected move in market direction with surgical precision. They may be early to a big push lower right now, but that does not necessarily mean it won't happen. Remember, some of them have long positions in case they are early with their shorts.
We'll see how it goes of course, but I'd be uncomfortable with betting big on the long side with a reading like this.
We'll see how it goes of course, but I'd be uncomfortable with betting big on the long side with a reading like this.
coolhand
Well-known member
Another week and another intriguing NAAIM reading. I say intriguing because while the market has been in rally mode of late, today's NAAIM reading shows these money managers are not only not buying into the rally, but got leveraged short by a good margin. The bulls among them are not arguing much either as they are not levered up long and the so the reading remains bearish overall.
coolhand
Well-known member
No big changes to NAAIM today. The overall reading is a bit less bearish, but still bearish. Bearish leverage was tempered back to neutral this week, which means the bears do not expect to hit any (short) homeruns in the short term. The bulls had only a modest increase in long leverage, which changes nothing in that regard. These money managers remain bearish overall, which makes one wonder what they may be looking for to happen. I doubt they are simply technical managers and have no reason not think some of them have inside kind of info on what may be happening under the hood so-to-speak. That's part of what makes them smart money. They may know things we do not. I can only speculate, but it's why I like to follow their clues.
coolhand
Well-known member
I gave a warning last week that NAAIM was showing significant leanings to the bearish case and so far the action has justified that warning. Rallies have been substantial, but very brief (so far).
This week, NAAIM got even more bearish. Bullish longs cut their bullish leverage by quite a bit. Sentiment overall shows more conviction to the downside. The bears have not increased their leverage yet, but that may be caution in the face of bearish up-thrusts even as they are looking lower.
I remain bearish and continue to expect an overall trend lower, but beware of sudden, sharp drops if support keeps getting taken out.
This week, NAAIM got even more bearish. Bullish longs cut their bullish leverage by quite a bit. Sentiment overall shows more conviction to the downside. The bears have not increased their leverage yet, but that may be caution in the face of bearish up-thrusts even as they are looking lower.
I remain bearish and continue to expect an overall trend lower, but beware of sudden, sharp drops if support keeps getting taken out.
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Humm
coolhand
Well-known member
Of course, I am only giving my interpretation of what the smart money is doing, though I would like to think my interpretation is close to the mark. But the stock market often has it's own ideas. Still, the smart money is now bearish and that could potentially go on for weeks to months before a low is in. It's not guaranteed, but the smart money doesn't like losing money either so the risk certainly looks to be on the downside right now.
I cannot tell anyone what to do. It's never that easy or certain. But I hope the information can be used to make a decision (based on NAAIM and other indicators) one can live with given the potential risks.
nasa1974
Moderator
Great so what do you do when your account is down 6 figures? Try and ride out a bear market that can make it worse, hope you can slowly recover or lick your wounds and take the loss before your account tanks?
DreamboatAnnie
Well-known member
Coolhand, Thank you so much for your highly valued commentary! :smile:
coolhand
Well-known member
The latest NAAIM reading is of particular concern this week. These smart money managers are now collectively leaning decidedly bearish. Many bulls among them have switched positions to bearish or neutral, though some of them remain highly leveraged long. Still, the bullish longs are now the minority and it may only be continued hedging in case a bear rally occurs prior to a deeper decline. It is not unusual for the market to go in the opposite direction of a big move in NAAIM, but any move by the market counter to their collective sentiment typically lasts a few days at most (if it happens at all). This is not a signal, but a warning to longs on the bullish side. I now expect price to move lower over the days and maybe even the weeks ahead unless something changes (intermittent rallies notwithstanding).
coolhand
Well-known member
Hi Boghie.
Perhaps, but NAAIM isn't hard over on the short side the way they were on the long side when we were still in a raging bull market, so I would spread out my risk. NAAIM is not giving any clear path with them sitting largely neutral.
coolhand
Well-known member
Today's NAAIM reading shows a somewhat modest rise in bullishness, but overall the reading has not changed much in terms of risk. I see the reading as neutral to modestly bearish now. The bulls and bears have both tempered their long and short positions. I see a picture of continued caution overall.
I want to point out something that may seem obvious, but it really isn't that obvious to many folks. The term "bullish" and "bearish" obviously point to a traders feelings about the market. But how are we using these two emotional terms when assessing risk? In other words, how do these words affect us emotionally in the context to which they are used?
In my first sentence above I said that the reading saw a modest rise in bullishness. What emotional triggers did you have when you first read that? Was your first thought that maybe a bottom is in? If you are looking for reason to get long right now, does this statement at least initially push you more in the direction of getting invested? Are you afraid of missing out on the long side? Or maybe you are more bearish and looking for a reason to stay on the lily pad (so to speak).
I bring this up because sometimes we can look at a given metric (in this case NAAIM) as a signal of sorts. And it can be used as a signal (I don't view it as a signal, but more of an indication) when coupled with other indicators, but that indicator does not have to necessarily be bullish or bearish. It can also be neutral (like now).
Looking at the past weeks and even months, we can see why NAAIM has been largely hedging their positions for months now. So, even though there was a somewhat modest rise in bullishness this week, don't let that trigger word push you in a direction unless you understand the risks. NAAIM has been largely telling us to be very wary of this market for some time. They have flexibility to maneuver in this market that we do not have in TSP. Look at the volatility right now. The moves are darn difficult to anticipate; especially the degree of the move. And I won't even get into the geopolitical risks right now. It's a battleground in the financial markets as well as other places.
While this market has certainly not entirely fallen apart, it could. This is not the bull market we enjoyed for so many years. Always keep in mind the longer term trend (last few months). It is not bullish. It is neutral and undecided where it is heading.
The emotional impact of losing money is greater than the emotional impact of gaining it. That is a fact. It's why people jump out windows when confronted with significant losses.
The whole point of this message is to watch your emotions and keep in mind the bigger picture. It is not a bearish or bullish post. Use NAAIM to your advantage and be mindful that they are quite wary.
I want to point out something that may seem obvious, but it really isn't that obvious to many folks. The term "bullish" and "bearish" obviously point to a traders feelings about the market. But how are we using these two emotional terms when assessing risk? In other words, how do these words affect us emotionally in the context to which they are used?
In my first sentence above I said that the reading saw a modest rise in bullishness. What emotional triggers did you have when you first read that? Was your first thought that maybe a bottom is in? If you are looking for reason to get long right now, does this statement at least initially push you more in the direction of getting invested? Are you afraid of missing out on the long side? Or maybe you are more bearish and looking for a reason to stay on the lily pad (so to speak).
I bring this up because sometimes we can look at a given metric (in this case NAAIM) as a signal of sorts. And it can be used as a signal (I don't view it as a signal, but more of an indication) when coupled with other indicators, but that indicator does not have to necessarily be bullish or bearish. It can also be neutral (like now).
Looking at the past weeks and even months, we can see why NAAIM has been largely hedging their positions for months now. So, even though there was a somewhat modest rise in bullishness this week, don't let that trigger word push you in a direction unless you understand the risks. NAAIM has been largely telling us to be very wary of this market for some time. They have flexibility to maneuver in this market that we do not have in TSP. Look at the volatility right now. The moves are darn difficult to anticipate; especially the degree of the move. And I won't even get into the geopolitical risks right now. It's a battleground in the financial markets as well as other places.
While this market has certainly not entirely fallen apart, it could. This is not the bull market we enjoyed for so many years. Always keep in mind the longer term trend (last few months). It is not bullish. It is neutral and undecided where it is heading.
The emotional impact of losing money is greater than the emotional impact of gaining it. That is a fact. It's why people jump out windows when confronted with significant losses.
The whole point of this message is to watch your emotions and keep in mind the bigger picture. It is not a bearish or bullish post. Use NAAIM to your advantage and be mindful that they are quite wary.
coolhand
Well-known member
Well, NAAIM came in overall more bearish this week. Pretty good drop off from last week's reading. That doesn't necessarily mean increased selling pressure is imminent (though it might), but risk is more elevated to the downside over the days ahead. The bears among them got more bearish with short leverage increasing, while some of the bulls got more bullish with increased long leverage. Still, taken as a whole this group of smart money is moderately bearish.
coolhand
Well-known member
This week's NAAIM reading shows a somewhat modest move to a more bullish stance overall, but not enough to take the overall picture out of neutral or at best modestly bullish. Leverage on both sides (short and long) did not change all that much. In other words, this smart money continues to spread out their risk, which means the market remains somewhat uncertain as far as they are concerned.
