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coolhand's Account Talk
- Thread starter coolhand
- Start date
I will make a copy of the post and "stick" it at the top of the Psychology of Trading forum...
https://www.tsptalk.com/mb/psychology-of-trading/38722-how-use-naaim.html
coolhand
Well-known member
The modest to moderately bullish NAAIM reading from last week has not been bullish. But I said last week that they were not wildly bullish so a bullish outcome for that week's signal was not a given. They played both sides with a slant toward bullishness.
This week, they are collectively more bullish than last week. Seems that there is an expectation of a reversal back to the upside given the shift toward more bullishness. I note that the bulls among them got more bullish and the bears a bit more bearish (as far as leverage goes).
So, I would think that based on this reading we may see an upside reversal over the days ahead. But, this is a difficult market to gauge, so even if we get that upside reversal, how long might it last and how much upside might we see? The bull market we enjoyed for all those years is in the rear view mirror until another one manifests.
Good luck in your market position, however you chose to position yourself.
This week, they are collectively more bullish than last week. Seems that there is an expectation of a reversal back to the upside given the shift toward more bullishness. I note that the bulls among them got more bullish and the bears a bit more bearish (as far as leverage goes).
So, I would think that based on this reading we may see an upside reversal over the days ahead. But, this is a difficult market to gauge, so even if we get that upside reversal, how long might it last and how much upside might we see? The bull market we enjoyed for all those years is in the rear view mirror until another one manifests.
Good luck in your market position, however you chose to position yourself.
flalaw97
Member
With regard to the NAAIM deviation number, I think that it represents how closely packed the surveyed members are together. So the lower deviation (like the 21.67 this week) means that they are mostly on the same page; whereas, if the deviation is higher (like the end of Feb, early March the deviation was in the 70s) means there is a wider spread of opinion. I think what is important is CH's description of how we (TSP users) can USE the NAAIM to predict the type of market the smart money thinks it will be longer term (not day to day) to identify longer stretches of bull or bear markets. A prolonged series (3 or 4 weeks) of NAAIM numbers over 70 along with the most Bullish being leveraged +200 is to me a good indicator that being heavily in equities (S&C) is the right place to be. When a streak like that stops, it is time to pay close attention and perhaps consider pulling back. But again, this is all in the bigger context of what are your long term goals, when will you need the money and is it better to ride out the dips if your event horizon (withdrawing funds from TSP) is a long way away?
DreamboatAnnie
Well-known member
CoolHand, Thank you so much for your help on NAAIM and for providing your take on it and how your reading was determined.
I hope you continue visiting us and I love your commenting ...hope you visit weekly or at least every month! :smile: I had documented some of your comments on NAAIM, but your explanation is very comprehensive.
I still visit the site you recommended at https://x22report.com/ and read The Creature From Jekyll Island. https://archive.org/details/TheCreatureFromJekyllIslandByG.EdwardGriffin
Best wishes to you and God's blessings to you. :smile:
P.S. I like Epic's suggestion asking Tom to make it a Sticky Note!
I hope you continue visiting us and I love your commenting ...hope you visit weekly or at least every month! :smile: I had documented some of your comments on NAAIM, but your explanation is very comprehensive.
I still visit the site you recommended at https://x22report.com/ and read The Creature From Jekyll Island. https://archive.org/details/TheCreatureFromJekyllIslandByG.EdwardGriffin
Best wishes to you and God's blessings to you. :smile:
P.S. I like Epic's suggestion asking Tom to make it a Sticky Note!
Last edited:
Epic
Well-known member
Thank you very, very much! That's such a Huge Help for sure. Hey Tom, can you make Coolhand's explanation of how to understand NAAIM a "Sticky"?? I don't even know if we have "Sticky's" here, but his description should be placed where anyone can access it and it doesn't get buried and lost in a thread where no one can find it. This is great information.
Thanks again Coolhand. Glad your back!!!
Thanks again Coolhand. Glad your back!!!
coolhand
Well-known member
Okay, just so we all understand, I did explain how to use NAAIM in some detail within the past 2 years or so. It is in my thread somewhere, but I know it's somewhat tedious to dig out.
First, do not let all the columns and numbers mystify you. Your don't need to understand all of the specifics about what these numbers mean in great detail. Even I do not know exactly how they come up with the readings in the columns beyond a somewhat superficial perspective. But I only need to see how the smart money is positioning each week (week to week) to get an idea of what the market may do in the days ahead. Remember, this is "smart money". You do not generally fade smart money. They are considered insiders on some level. Professional money managers. Because the folks on this board (TSP) are not "day trading" their accounts, we only need to get an idea of how the smart money is positioning each week. This is not a surgical reading. You cannot use it to day trade. It comes out weekly only, which is great for folks in TSP since we only have so many trades a month. I know this may sound obvious to some of you, but it needs to be said to make sure we are all on the same page.
So, here is what you need to know. The MAIN NUMBER to watch is the MEAN/AVERAGE. Which way did it move and by how much? That is primarily what I am looking at.
Now, my basic rule of thumb when determining bullish, bearish, neutral readings is recognizing (generally) where those sentiment readings fall on a scale. The scale that I use (my own scale) is that the upper NAAIM mean/average rarely goes above 110 (bullish), so that's my upper limit (generally). The lower number rarely goes below 30 (bearish). So, that puts neutral at about 70 or so. That's how I determine their overall sentiment.
Now, the Bearish and Bullish columns I believe have to do with how much leverage these money managers are using. I don't know how they make that determination, but it's obviously part of the survey they take each week among the money managers. The Quart 1, 2 and 3 columns I believe are groups of money managers, but I do not know how those groups are determined or exactly what those numbers are telling us (I think it also has to do with leverage). I don't care about the deviation column.
Let's keep in mind that good traders often play both sides of the market; especially in times of uncertainly like now. So if you lose in one area, you gain in another. That's how risk can be managed. In TSP, the closest you can come to that is adjusting your cash holdings (G fund) vs stock holdings because you can't short the market.
So, looking at this past week, there was a big jump in the mean from 52.69 to 79.72. Well, 59.69 was below my neutral line (70), so they were leaning bearish at that time, but not overly so. This week, the number is above it, so they are modestly to moderately bullish. The higher that number goes, the more bullish the reading and vice versa for bearish readings. So, because they are not wildly bullish (over 90), that tells me they are still at least somewhat wary of the upside. In other words, they didn't jump in with both feet. But collectively, they are still leaning bullish given the mean/average.
One thing about leverage, the more leverage the smart money is using, the stronger their conviction about where they think this market is going. Make sense? So as those numbers go up and down, so does their conviction.
The reading is most beneficial in full blown bull markets with minimal volatility. You can successfully use this reading for months and months under that condition and get it right for long periods of time. We are not in that kind of market right now. It is interesting though that this latest reading is the highest in many weeks. But the reading itself is not heavily bulled up (as I said previously), so we'll have to watch how things go in April and beyond.
I hope this helps.
First, do not let all the columns and numbers mystify you. Your don't need to understand all of the specifics about what these numbers mean in great detail. Even I do not know exactly how they come up with the readings in the columns beyond a somewhat superficial perspective. But I only need to see how the smart money is positioning each week (week to week) to get an idea of what the market may do in the days ahead. Remember, this is "smart money". You do not generally fade smart money. They are considered insiders on some level. Professional money managers. Because the folks on this board (TSP) are not "day trading" their accounts, we only need to get an idea of how the smart money is positioning each week. This is not a surgical reading. You cannot use it to day trade. It comes out weekly only, which is great for folks in TSP since we only have so many trades a month. I know this may sound obvious to some of you, but it needs to be said to make sure we are all on the same page.
So, here is what you need to know. The MAIN NUMBER to watch is the MEAN/AVERAGE. Which way did it move and by how much? That is primarily what I am looking at.
Now, my basic rule of thumb when determining bullish, bearish, neutral readings is recognizing (generally) where those sentiment readings fall on a scale. The scale that I use (my own scale) is that the upper NAAIM mean/average rarely goes above 110 (bullish), so that's my upper limit (generally). The lower number rarely goes below 30 (bearish). So, that puts neutral at about 70 or so. That's how I determine their overall sentiment.
Now, the Bearish and Bullish columns I believe have to do with how much leverage these money managers are using. I don't know how they make that determination, but it's obviously part of the survey they take each week among the money managers. The Quart 1, 2 and 3 columns I believe are groups of money managers, but I do not know how those groups are determined or exactly what those numbers are telling us (I think it also has to do with leverage). I don't care about the deviation column.
Let's keep in mind that good traders often play both sides of the market; especially in times of uncertainly like now. So if you lose in one area, you gain in another. That's how risk can be managed. In TSP, the closest you can come to that is adjusting your cash holdings (G fund) vs stock holdings because you can't short the market.
So, looking at this past week, there was a big jump in the mean from 52.69 to 79.72. Well, 59.69 was below my neutral line (70), so they were leaning bearish at that time, but not overly so. This week, the number is above it, so they are modestly to moderately bullish. The higher that number goes, the more bullish the reading and vice versa for bearish readings. So, because they are not wildly bullish (over 90), that tells me they are still at least somewhat wary of the upside. In other words, they didn't jump in with both feet. But collectively, they are still leaning bullish given the mean/average.
One thing about leverage, the more leverage the smart money is using, the stronger their conviction about where they think this market is going. Make sense? So as those numbers go up and down, so does their conviction.
The reading is most beneficial in full blown bull markets with minimal volatility. You can successfully use this reading for months and months under that condition and get it right for long periods of time. We are not in that kind of market right now. It is interesting though that this latest reading is the highest in many weeks. But the reading itself is not heavily bulled up (as I said previously), so we'll have to watch how things go in April and beyond.
I hope this helps.
Epic
Well-known member
Okay.....So I'm gonna post up a few questions here on how you interpret the chart and numbers because it's a bit confusing. At least to me it is..... :blink:
First of all, these "Range Of Responses" makes no sense to me.
100% means 2 different things, 200% means 2 different things, and there's no negative numbers listed as is reflected in the weekly Bullish/Bearish chart where it displays numbers for each week.:dunno:
This week in the Bullish column, we're at 105, which is down 20 (less) from the week prior at 125, and yet you say it's overall more Bullish because the Mean/Average number is up from 52.69 to 79.72 ??? I don't understand at all...
If you look back a couple weeks when we were going strait up, the Bullish column had 200, and the Bearish column had -100, with a Mean/Average number of 46.68. What does all that mean???
If you could explain just those 3 things, that would be a good start and a big help. Thank you ! ! ! ! !
First of all, these "Range Of Responses" makes no sense to me.
100% means 2 different things, 200% means 2 different things, and there's no negative numbers listed as is reflected in the weekly Bullish/Bearish chart where it displays numbers for each week.:dunno:
This week in the Bullish column, we're at 105, which is down 20 (less) from the week prior at 125, and yet you say it's overall more Bullish because the Mean/Average number is up from 52.69 to 79.72 ??? I don't understand at all...
If you look back a couple weeks when we were going strait up, the Bullish column had 200, and the Bearish column had -100, with a Mean/Average number of 46.68. What does all that mean???
If you could explain just those 3 things, that would be a good start and a big help. Thank you ! ! ! ! !
coolhand
Well-known member
I haven't been home to post today, but I'm back now and took a look at NAAIM. They took a decided bullish turn higher today. A pretty good sized move, which could bring selling over the next couple of days, but beyond that they are expecting higher prices over the days ahead. I would say they are now moderately bullish.
rangerray
Member
I was becoming very interested in the NAAIM readings, but by the time I started to really pay attention, you were gone. So, I'm glad you're back. If you find it in your heart and time budget to explain a little about how you process the numbers, I'll be all ears. Happy posting!
:banana:
Coastalview
New member
Nice to hear from you, CH!
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