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The latest NAAIM reading plunged more than 41 pts this week. The mean average is now quite bearish. The numbers show the bears going fully short and leveraged. The bulls remain fully long and leveraged, but this is probably more to do with hedging their positions.

I know that many see the size of a move like this and are tempted to treat it like a contrarian indicator, and you might get away with that in the very short term, but it is playing with fire in my opinion under the circumstances. Still, this market does like to frustrate the bears, but the bears have not really been wrong the past few weeks so there is that.

I would not be surprised by some attempt at a rally in the short term given the size of the move, but this smart money has been very persistent on the short side for some time now. I interpret this as increased downside risk. It's just a question of timing the move (if it comes).
 
So, after last week's spike in bearishness among the NAAIM money managers, the market did what it has done so many times in the past.

It rallied.

This is not a surprise as this is how the "game" is often played.

Going back many months and beyond, when NAAIM got to leaning bearish the market usually went the other way. This typically led the NAAIM money managers to back off their shorts in big way. And they didn't short all that often in big numbers back then. They were much more respectful of the upside.

Why am I bringing this up? Glad you asked.

This week, the NAAIM mean average ticked higher by a whopping 4 pts. That means it remains quite bearish. The bears did not really back off and the bulls did not add to their bullish positions either. I find that very interesting. The bears remain fully short and leveraged (in big numbers) and the bulls remain fully long and leveraged in smaller numbers.

The main thing I would say about this is that I would not get overly bullish over this current rally. I really don't get the impression that the "low" may be in given the continued bearish sentiment of these money managers.
 
Your insight is always something to ponder. Should I stay in or get out. Just another tool in the toolbelt. Thanks.
 
nasa1974 said:
Your insight is always something to ponder. Should I stay in or get out. Just another tool in the toolbelt. Thanks.
Click to expand...

It makes me wonder what these money managers might know that maybe we do not. There is much going on on a global scale and inside information is out there if one has the connections to tap into it. Just speculation on my part, but they are leveraged short for some reason and not getting pushed out of those shorts to this point.
 
Another shot higher. If this market is being prepped to go lower, "they" sure as heck don't want anyone to profit from it.
 
Thanks, CH
I try to get the utilize your insights about the situation as best as I can. I’m not sure if I know but I follow your lead and I stay as safe as I can.
D
 
Well, the NAAIM money managers continued to lean heavy on the short side last week and paid the price as the market produced a pretty sizable short squeeze. It was more than enough to back off the bears as there are no (ZERO) short positions shown in the latest readings. There was an uptick in bullish positioning as the bulls remain fully leveraged long, but the overall reading is only neutral to modestly bullish. This suggests to me that they are going to bide their time for another downside opportunity. So, the downside may be limited for now, but how much more upside can be had after last week's ramp job?
 
The week's NAAIM mean average ticked up a little more than 10 pts this week. That gives us a modestly bullish reading. But while the reading is leaning modestly bullish, the bears among these managers are fully leveraged short again. And the bulls added to their leveraged longs as well. So, the managers are looking both ways at this point, which is not a surprise given how much rally we've had in recent days. A pullback would be almost a given at some point. But because they are leaning towards the bullish side overall, I think the risk may still be to the upside (a short pullback notwithstanding).
 
This week's NAAIM mean average ticked up again this week, this time by almost 6 pts. I'd say it is now moderately bullish. The bears remain fully leveraged short and the bulls remain fully leveraged long. Overall, it's really not a much different picture from last week. These managers are looking both ways, but the bulls get the nod again this week.
 
The latest NAAIM mean average reading bumped up a bit more than 3 pts this week, which keeps it moderately bullish. The bears remain fully leveraged short and the bulls remain fully leveraged long. It looks like more upside in the short term, but a shot lower mixed into the bullish market bias would not be a surprise.
 
This week's NAAIM mean average fell a little more than 5 pts, which keeps the reading moderately bullish. The numbers didn't change all that much as the bears remain fully leveraged short and the bulls remain fully leveraged long. So, just some shuffling of positions here. I do note that this is the 4th consecutive week that the bears have been fully leveraged short, so they seem rather committed to this position (keep in mind that they probably have leveraged long positions too). But, in my view it still serves as a warning that things can go South at some point and given the leverage being used and the tenacity of their short side commitment, it could happen quickly. It is as though they do not want to entirely miss out on an anticipated move lower (yeah, we know how much faster we can go down than up). But until something happens to turn things around, the bulls remain favored.
 
The NAAIM mean average ticked up less than 2 pts today, so it remains moderately bullish. The bears remain fully leveraged short and the bulls are fully leveraged long. Their positioning tells me that things are not as rosy as some would have us believe. The bulls continue to remain favored for now.
 
It has been very interesting to watch how NAAIM is positioned as we enter each new week and this week is no exception. After holding fully leveraged short positions for 5 straight weeks in the face of this parabolic rally, the bears almost all jumped off that ship and on the bull train. The mean average jumped higher almost 20 pts, which makes that reading very bullish. Ordinarily, I'd be bullish too with this reading, but I don't trust this market at all as it feels ever more manipulated as time advances. Be that as it may, this is smart money and it generally doesn't pay to bet against them for long periods of time. Especially when they are all bulled up. But how much longer can this market advance? Does Santa have anything left in his bag?

Well, we are going to find out soon enough as NAAIM believes the bull party continues on for now.
 
The market looks good for now. Let's hope it doesn't get pushed off the cliff like yesterday. Our ultra bull would be happy today. Peace wherever you are.
 
The bullish march continues this week as the NAAIM mean average ticked up more than 5 pts. They were quite bullish last week and now they are even more bullish this week. There are no bears left. They are pretty close to being all in (long and leveraged).
 
This week's NAAIM reading fell by almost 32 pts, which takes the reading from very bullish last week to modestly bullish this week. The size of the move could trigger at least a short term bounce in the market. Also, the bears are back as the reading shows fully short and leveraged bearish positioning once again. Overall, since the reading remains on the bullish side, the nod goes to the bulls.

So, last week the NAAIM data showed zero shorts in the numbers, which can be problematic when both the dumb and smart money are leaning hard in the same direction. But, keep in mind that the NAAIM bears went bullish the week prior to last week, so they probably didn't get hammered as much as it may have seemed as they reaped the benefits of the rally for a couple of weeks before the bottom fell out. This week, it appears we are back to a hedging strategy as we see some bearish positions with the bulk of the positioning on the bullish side.

Hope everyone had a wonderful Christmas and a Happy New Year!
 
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