Investor Sentiment

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7/22/04
The new AAII Investor Sentiment Survey numbers came out today. These numbers are tabulated with a Wednesday cut off date so I don't know how much of yesterday's (July 21) drop was considered.

Percent of those asked that are Bullish = 36% (down from 47% last week)
Percent of those asked that are Bearish= 24% (same as last week)

If this survey was taken after the close yesterday, I would be worried about the bearish number not being higher. As I've said, we'd like to see that bearish number be closer to 40% for a sign of a bottom. When the Dow was down 100 points again this morning, I'll bet that number jumped to at least 30%.
 
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I get it at decisionpoint.com, which is a pay site. You can probably get it at AAII.com also but I believe that is a pay site also.
 
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If the losses / stagnation continue, I'd think the bear sentiment will climb dramatically.

Keep an eye on the F fund - if there's some sort of mass exodus to that fund (Bearish behavior), I'd expect its share price to climb accordingly.
 
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I thought the Democratic Convention concluded on July 26th but it actually starts then and ends on July 29. Maybe stepping aside until Friday July 30 or Monday August 2nd is something to consider. That will obviously have to wait for Monday morning to decide.

Something has to get that sentiment down... those stubborn bulls. :oo
 
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Here is an interesting article:

http://biz.yahoo.com/rb/040720/column_stocks_week_2.html

According to this, it appears most investors are simply "waiting for something to happen". And yes, "geopolitical uncertainty" was mentioned as well. Looks like we could be adrift for awhile - in spite of the fact that a number of companies reported solid earnings (this failed to generate much investor interest in the overall market).
 
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Mike wrote:
And yes, "geopolitical uncertainty" was mentioned as well.
Why aren't we desensitised to that yet? sheesh.




Charles Schwab's Greg Forsythe said that another reason for the market's slowdown is that the so-called 'momentum investors' are staying away.
baha, except this one! :dah: <-- Moi



Frizz --> :dude:
 
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Ok i cant hold off this comment any longer. The bullish/bearish indicator overa very long period of time tends to be a mildly contrarian signal. That being said.... on the shorter term, its very borderline useless IMHO. Why do I say that? My personal experience with my dad which is as follows:

The bulls vastly outnumbered the bears all through the 90s on a day to day basis, and you know what? They were right almost every single day. I remember having to listen to my dad (who owned some common stocks at the time, but was heavy in cash) every day in the 90s about how overbought the market was, how it was going to crash, and howall the greedy bullswas a "negative" indicator. Well, you know what? I watch him "not" make money for a decade for that reason. Oh well sure, he was right by 2000. But i'd still take stocks over bonds in the 90s, heavy positive bulls indicator aside.

Where the indicator might be useful is where greed is obviously rampant as one really could say was the case in late 99, with a glance at the nasdaq chart spike upwards. That being said, the nasdaq is WAY off its all-time high now, so there's no way this exception would be applicable now or anytime soon.

Azanon
 
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There is no tell all, be all indicator but I believe investor sentiment is one of the mostpowerful psychological indicators, or any type of indicator, available. Even in the 90's when we had a strong bull market there were periods of fairly stong pullbacks. The fall of 1998 comes to mind. So a buy and hold strategy would have worked very well but you could make better trades if you are timimg the market with this indicator.

I won't write a long explaination why I believe this to be true because I'm guessing youhave formed you own opinion already,but I will say for anyone else reading this that during bull markets, a high bearish percent reading is a great indicator that the bottom is near and during bear markets, a high bullish reading is a sign of a top.Since right now the 3 legs of a bull market I talk about are looking quite strong (psychology is a bit weak because of sentiment)I believe once the sentiment indicator gets to a level where there are more bears than bulls (or close to it), we will be looking at the bottom.
 
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The bullish/bearish indicator overa very long period of time tends to be a mildly contrarian signal.

Its not my mind made up so much as just a general sentiment in the investor world. My understanding is that it is a mild contrarian signal, not a be-all, end-all trigger to base a timing decision on. I'm sure i could come up with some links to support that if needed. Still, I dont see how that should even benecessary given the rampant bullish attitude that pervaded in the 90s, and the performance that accompanied that attitude. To be honest, i canunderstand how mathematically it could be contrarian at all since when people want more of a stock, the price reacts by going up, not down.

Regarding your comment about pullbacks in the 90s, 1998, whenever, and being able to take advantage of those, my comment to that is that its also relatively accepted that timers generally lose in bull markets. Only a really, really adept timer (or just plain lucky person) could have beaten a buy-and-holder from 1990-1999. The timer's only real chance to beat the buy-and-holder would have been to predict and act upon the overbought condition at the turn of the century. However, if this site's any example, these timers would have just bought it back a week or two later (judging by the frequency of trades here).

I think it only fair to point out the converse;Timers tend to do well in bear markets cause (obviously) they're not always in the market 100% of the time during a downward trend.
 
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azanon wrote:
I think it only fair to point out the converse;Timers tend to do well in bear markets cause (obviously) they're not always in the market 100% of the time during a downward trend.
Oh yeah of little faith. I actually prefer up and down markets like we are having this year. And, since Joel pointed out some inverse funds to the market, I love it even more! :^
 
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Oh yeah of little faith. I actually prefer up and down markets like we are having this year.


Guess that just depends on your perspective. I see it as simply a down market. Look at the dow, nasdaq, s&p 500 at Jan 1, 2004 and look at it today. Did it fluctuate on the way there? Well sure. When does it ever go in a perfect straight line? Being that it is bear so far, if there is a time the strategy on this site should be working, given both the bear market and the fluctuations.... it would be now. I rest my case.
 
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You just contradicted yourself. In a bull market, does it go in a straight line? No? Then I would have the ability to make more than buy and hold don't ya think? I rest my case. :l
 
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mlk_man, I was thinking about your strategy, ie, buying when the indexes movea set percentage below the 63 moving average and selling when they move a set percentage above the 63 moving average. I can see how this strategycould workparticularly wellif the indexes are operating within aset range. Do you have rules for when the markets move strongly out of the range? Your strategy could lead to disappointment if theindexes continue to move lower after your buy signal kicks in.
 
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Uh oh...the line is drawn, and the buy-and-holders are teaming up!

Who's got the popcorn? :D

I am starting to think that moving averages are the way to go, the closest thing to an adaptive,universal, absoute "indicator".

:dude:<-- Frizz B.
 
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Rolo, I am in no way ganging up. Iam just curiousto find out if he has factored in anescape hatch for a prolongeddownward turn, ie, time to comein fromthe rain. :)
 
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That's why I use both Rolo. If you see that the market is trending up, you just in and ride. Like Aug 2003 to Jan 2004. Could I have gotten in and out because of my system a couple times when the market dipped? I don't know, wasn't doing this then.

Then if the markets are trending down, just stay out and in the G or F. I'm considering setting a downward "cutoff" at .50 below my 63-day moving, but I think I'll jjust watch the moving averages and go back that.

The .30 above and .20 below have worked well this year because of the up and down status of the markets. Unlike azanon, I believe the markets are trending sideways not down. http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=sp500
 
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Pete1 wrote:
Rolo, I am in no way ganging up.
hehe, I did not mean to imply anything with my comic relief. I think it is great Az has a buddy to back him up... he'll look less Quixotic in this high-tech, break-neck, day-trading, hyphenated-word world. :D
 
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You just contradicted yourself. In a bull market, does it go in a straight line? No? Then I would have the ability to make more than buy and hold don't ya think? I rest my case.


When did i say in a bull market it goes in a straight line (i'll help you, i didnt). In theory, would you have the ability to make more than me in a bull market. Yes. In practice? I seriously doubt it.

I guess things will never change. Everyone seems to know what the market is going to do tomorrow. On any given day, i can always find two experts (that really are experts) in the world of investing that have a dichtomous view of what's going to happen tomorrow.
 
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