sentimenTrader Blog


2017-06-28 | Jason Goepfert | Comments

Several times over the past five years, we’ve taken a look at times when fund sponsors split the shares of their leveraged and/or inverse ETFs. When it occurs in clusters, or happens to some of the largest funds, it has been an excellent contrary indicator. So it was interesting that ProShares has now announced a […]

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2017-06-21 | Jason Goepfert | Comments

It’s somewhat difficult to find any indicators among the many we follow that are showing excessive pessimism toward stocks. On any given day lately, there have been maybe two or three. One that has shown up for the past several days is the Call/Put Ratio from the ISE Exchange. Over the past three days, it […]

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2017-06-20 | Jason Goepfert | Comments

Markets are mostly quiet (again), but not so much in the energy patch. Oil is getting hit again and is now down 20% from its most recent peak, arbitrarily considered a bear market at this point. We saw in a recent report that although oil has lost 2% a week for the past few weeks, […]

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2017-06-14 | Eric Brown | Comments

Currently, there are 6 Stock indicators at Pessimistic Extremes and 48 Stock indicators at Optimistic Extremes.

The tables below display stock market indicators that are at Very Optimistic, Extremely Optimistic, Very Pessimistic or Extremely Pessimistic levels. Note: These tables contain only indicators from the Stocks section of the site. For the tables below, you can click through to each chart by clicking on the Chart name.

Pessimistic Extremes

Chart Last Close Last Update Sentiment
QQQ Liquidity Premium
78.0
2017-06-13
Insider Buy/Sell Seasonally Adj
1.17
2017-06-09
Rydex Energy Assets
27.3
2017-06-13
Rydex Energy Services Assets
14.1
2017-06-13
Small Spec Index Position
-4.92
2017-06-06
DIA Open Interest Ratio
0.7749
2017-06-13

Optimistic Extremes

Chart Last Close Last Update Sentiment
Short-term Optimism Index (Optix)
71.0
2017-06-13
AIM (Advisor and Investor Model)
71.0
2017-06-09
% Showing Excess Pessimism
3.0
2017-06-13
% Showing Excess Optimism
36.0
2017-06-13
VIX
10.42
2017-06-13
SKEW Index
136.9
2017-06-12
Options Speculation Index
124.0
2017-06-09
Small Trader Call Buying
36.0
2017-06-09
NYSE High/Low Ratio
87.0
2017-06-13
NASDAQ 100 Down Pressure
9.0
2017-06-13
Risk Appetite Index
78.0
2017-06-07
Equities as % of GDP
0.86
2017-03-31
NASDAQ 100 Combo Hedgers Position
-22226600000.0
2017-06-06
DJIA Hedgers Position
-25077.0
2017-06-06
DJIA Mini Hedgers Position
-50153.0
2017-06-06
DJIA Combo Hedgers Position
-10600600000.0
2017-06-06
Odd Lot Purchase Percentage
65.6999
2017-06-12
NAAIM Exposure Index
89.6
2017-06-07
Mutual Fund Cash Level
3.2
2017-04-28
Equity / Money Market Asset Ratio
4.62
2017-04-28
Retail Money Market Ratio
2.62
2017-04-17
NYSE Available Cash
-248093.0
2017-04-28
Rydex Ratio
82.0
2017-06-13
Rydex Money Market %
13.0
2017-06-13
Rydex Bull/Bear RSI Spread
86.0
2017-06-13
Rydex Total Bull Assets
1844.5
2017-06-13
Rydex Total Bull / Bear Ratio
10.5
2017-06-13
Rydex Biotechnology Assets
314.1
2017-06-13
Rydex Consumer Products Assets
323.2
2017-06-13
Rydex Electronics Assets
90.2
2017-06-13
Rydex Financial Services Assets
36.4
2017-06-13
Rydex Leisure Assets
50.1
2017-06-13
Rydex Technology Assets
109.2
2017-06-13
Dumb Money Confidence
68.0
2017-06-13
Hedge Fund Exposure
0.321
2017-06-08
Conference Board – Stocks
20.1
2017-05-31
Volatility ETF Fund Flow
0.063
2017-06-12
% Showing Excess Optimism-Pessimism Spread
0.33
2017-06-13
S&P 500 Buying Climaxes
68.0
2017-06-09
QQQ Open Interest Ratio
1.9068
2017-06-13
Fund Flow – ETF Total
15521.0
2017-05-31
Fund Flow – ETF Domestic
11651.0
2017-05-31
Fund Flow – Combined Total
14000.0
2017-05-31
Fund Flow – Combined Domestic
8483.0
2017-05-31
Fund Flow – Combined World
5517.0
2017-05-31
Short-Term Risk Levels
6.0
2017-06-13
Consumer Confidence – Stocks Up
42.6
2017-05-31
Consumer Confidence – Stocks Down
22.5
2017-05-31

2017-06-07 | Jason Goepfert | Comments

The oddities continue to pile up. In the Report on Wednesday, we looked at times when declining volume outpaced advancing volume for almost two weeks, while stocks gained during that time. Very rare. In late May, we looked at times when many stocks within the S&P 500 index reached a 52-week high, and there was […]

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2017-06-05 | Eric Brown | Comments

Over the weekend we released a new version of the website that now allows users to plot any indicator as a secondary indicator.

Previously, you could only plot similar indicators (e.g., SPY Optix vs DIA Optix) due to technical limitations, but those limitations have been removed.  Now you are able to plot almost any indicator as a secondary indicator to any other indicator. Note: I say ‘almost’ any indicator because seasonality charts are not available to plot against other charts at this time.

A few examples are below.

SPY Optix vs SPY Shares Outstanding

SPY Optix vs SPY Shares Outstanding

Two Year Hedgers Position vs Two Year Optix

Two Year Hedgers Position vs Two Year Optix

SPY Fund Flow vs Spy Optix

SPY Fund Flow vs SPY Optix

TLT Social Sentiment (Premium Chart) vs TLT Optix

TLT Social Sentiment vs TLT Optix


2017-05-25 | Jason Goepfert | Comments

In the Report on Thursday, we took a look at the oddly low amount of volume flowing into securities on the NYSE for a day the S&P 500 rallied to a new high.

One of the issues with using NYSE breadth is that it’s impacted by issues that have nothing to do with the S&P 500 itself.

But even within the component stocks that make up the S&P, there is a disturbing lack of participation. An unusually low number of stocks are trading above their short-, medium-, and long-term moving averages given how well the S&P index itself has been performing. The reason, of course, is because a few large stocks are driving the index higher.

But what’s being masked is that an unusually large number of stocks within the S&P are not only lacking upside, they’re acting heavy.

According to Bloomberg data, 18.2% of stocks in the S&P made a 52-week high on Thursday, which is fine. But a remarkable 2.4% of them hit a 52-week low. That’s not fine.

Going back to 1990, there have been only three other days when more than 15% of stocks on the S&P reached a 52-week high on the same day that at least 2% of them also reached a 52-week low.

The dates were 1990-07-12, 2014-11-28, and 2014-12-08. The S&P’s reaction are shown in the charts below.

In 1990, it dropped more than 10% over the next month, while in 2014, it lost more than 4%. Its upside was not more than 1.5% in any of the cases. Yes, it’s only 3 precedents, but combined with the other breadth oddities, it’s a negative.


2017-05-25 | Jason Goepfert | Comments

It’s hard to not be suspicious of using price-based patterns when we seem to be continually seeing violations of prior historical patterns.

It’s entirely possible that the rise of quant-based trading has rendered many of these patterns unusable, either because they’ve been discovered and traded upon, or simply changed the dynamics underlying price activity. This has been especially true of very short-term movements. Medium-term and longer have been less impacted.

With that caveat in mind, stock futures are once again pointed higher this morning, despite (or because of) the overnight news flow.

Here is how the S&P 500 futures have performed after gapping up the morning after a new high and what had already been 5 straight up days. The table is focused only on occurrences during the bull market since 2009.

Even during the remarkable 2013-14 run, stocks took a short-term breather most of the time after such gap opens, at least over the next day or two.

Granted, all the other short-term price-based studies we’ve looked at in recent days suggested the streak should have ended at 3 days. Then 4 days. So we’re on the cusp of continually trying to push against a failed pattern, which can result in the dreaded “tilting at windmills” situation, especially as volume drops off and out-of-office email responses pile up ahead of the Memorial Day holiday.


2017-05-23 | Jason Goepfert | Comments

Stocks are struggling to hold modest gains. Ranges are contracting and volume is sagging. Same as yesterday – historically, this has been a negative pattern for future short-term returns, but it’s hard to know just how much we can rely on these given this:

 

Low Vol, Again

Bloomberg is out with an article similar to the one posted in the WSJ the other day about the rising equity exposure among risk parity types of funds. Among so-called low volatility funds, exposure is at an all-time high.

Like with the others, I overlaid the S&P 500 against the funds’ stock exposure. Not a perfect correlation, and there were only 3 occurrences, but other than in late 2013/early 2014 when so many things failed other than blind buying, stocks got a little rocky.

 

Tech Love

The folks who trade the Rydex family of mutual funds have rushed into the Technology fund, pushing assets above $100 million for only the 2nd time since the bubble burst.

Interestingly, assets in the main Nasdaq 100 ETF, QQQ, dropped heavily on Monday. The fund lost over $1 billion in assets, on a day the fund rallied.

This is highly odd, especially when it’s been near a high. The table below shows returns in QQQ going forward after it rallied at least 0.5% on the day but the fund leaked at least 2% in assets, and it was within 1% of a high.

We can see that there was some struggles over the next 1-2 months. QQQ suffered a bad average return and risk/reward ratio after these signals. About the only time it managed to rally almost uninterrupted was in 2011. The others all showed losses or a tiny gain over the short- to medium-term.


2017-05-22 | Jason Goepfert | Comments

Stocks are recording another up day, on lower volume and with a smaller range. Maybe all of the quant folks have made patterns like this useless – they have certainly seemed to lose some effectiveness in recent years – but this is a classic rebound pattern from a large loss. Historically, there has been an extremely high probability that this leads to losses over the ensuing week(s).

Following are some other items that popped up on my radar today.

RETAIL IS ALL IN…OR NOT

Michael Santoli is a mainstream journalist who “gets it”. He had a series of tweets outlining the argument that markets cannot top because retail, mom-and-pop investors are not yet fully in. In a twist, he noted that the arguments were from his very own article…in July 2007. Great perspective.

The argument that the retail investor is not fully invested is arguable, of course. We can all pick and choose an indicator or two that shows a compelling argument for one side or the other. But the counter-indicators (the ones suggesting that retail investors ARE nearly fully invested) are far more numerous.

Santoli has a typically good article on CNBC overviewing the current mood of individuals, and as noted, it is mixed depending on the choice of indicators. As he notes:

Yale economist Robert Shiller has surveyed professional and amateur investors for decades about their market expectations. Right now, both groups’ confidence that stocks will rise over the next year is near a multi-decade high. Yet the counterpart “Buy the Dips” and “Crash Confidence” indexes show elevated anxiety that the good times could end suddenly and painfully.

He’s certainly right about the confidence indexes. According to the Yale polls, investors have never really been as confident of a one-year rally as they are now. In the charts below, we overlaid the S&P 500 as an approximation of where stocks would have been about the time the survey was taken. Yale doesn’t give out the data, so it’s not exactly representative.

Investors were extremely confident of rising prices in 2001-02, again in 2004 and then in 2006 and 2014. Mixed record, but stocks did have a hard time making substantial gains afterward, at least over the next 6-12 months.

That’s tempered by the idea that investors are also NOT confident that there WON’T be a market crash. The double negative makes that a confusing statement, but the below chart can be looked at as a form of overbought/oversold measure:

It typically moves counter to the other Confidence index, but is diverging now. It’s hard to eyeball, but the only times we saw extremely high confidence in rising prices and low confidence that there won’t be a crash were in 1998 and 2000.

It’s not just retail that’s (probably) heavily invested. Pros are too.

LOW VOL IS A SLAM-DUNK TRADE

Apparently the “low volatility” bet continues to prosper, and insta-recoveries like last week will only embolden them.

The St. Louis Fed noted that their stress index continues to tick along near all-time lows. Not surprisingly, that has an exceptionally high correlation to the VIX.

As long as stress is low and v-shaped recoveries are the norm, might as well lever up the anti-volatility trade.

The well-documented concerns with low volatility revolve mainly around the idea that lack of movement causes investors to increase allocations to stocks, which loops back and helps further suppress volatility. As noted by the Wall Street Journal on Friday, that means allocations to stocks in so-called risk parity funds has soared above previous highs. I superimposed the S&P 500 over the Journal data to show how stocks have responded after other periods of extremely high risk parity stock exposure:

This probably will not end well.

BITCOIN SURGES AGAIN

Interest in the alternative currency Bitcoin has surged along with its price. Web searches for the currency have skyrocketed and are nearing the previous record from 2013, which led to a gradual erasure of all of the excited gains.

Twitter folks have picked up their interest as well, though not quite exceeding prior highs.

The astute Tommy Thornton noted that as Bitcoin has jumped, it just recorded an exhaustion signal as denoted by the analysis technique pioneered by Tom DeMark and Larry Williams. Recording a “13” very often precedes at least a short-term pause, no matter the data series.

This is probably a good spot to assume that future (and likely recent) gains will prove to be temporary.


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