Anxiety about markets are driving investors into bonds, helping drive the dollar higher, both markets near one-year extremes; Anxiety is also moving pre-market futures down to large opening gaps, especially relative to recent activity; Options volume in the VIX is surging; Small traders are buying puts; Corn went from a 6-month low to 6-month high in record time
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The AAII survey showed a relatively low percentage of bulls and high percentage of bears. The resulting Bull Ratio was only 44%, well below the 58% average seen during healthy markets.When "healthy" is defined a number of different ways, a Bull Ratio this low has consistently preceded gains in stocks. See the May 16, 2019 report for more.
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Pre-market futures have been persistently negative over the past two weeks. On an absolutely level, it is nearing the worst of the financial crisis.On a relative level - compared to other pre-market moves over the past year - it has eclipsed most readings since the inception of the futures in 1982. See the May 20, 2019 report for more.
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Here's what's piquing my interest on yet another weak day so far.More PanicYet another gap down open this morning, as the weeks-long pattern of pre-market panic continues. We've already looked at this a few times, but there's perhaps a better way to consider this.The gaps we've been seeing at the open are among the worst since the financial crisis (and before), but it't not really fair to compare the readings now versus 2008 when volatility was exponentially higher. So if we look at the ...
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Panic-level sellingWe’ve already touched on the persistent negative gaps traders have faced most mornings over the last couple of weeks. It’s worth noting again, because the gaps are now on par with panic-level conditions over the past 35 years.Other than 2008, future returns were excellent. That’s a bit like saying, “other than my face, I’d be handsome” but excluding the greatest financial crisis in 80 years is not completely out of order.Fund exodusThe past two weeks have seen large and ...
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Over the past 10 days, pre-market losses in S&P 500 futures have neared panic levels; The past four weeks have seen a $34 billion outflow from equity mutual funds and ETFs; Emerging market economic surprises are the worst since 2013; Hedgers are buying cotton and other agriculture contracts
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Here's what's piquing my interest as traders try to end the week on an up note.PanickyThe pre-market nerves are continuing. We've touched on this a few times this week, and traders continue to push futures down before the open of regular trading hours. Over the past 10 days, the average gap in S&P 500 futures is now down to -.75%.This is not something we often see, and other than during the grips of the financial crisis, was at/near the end of swift, severe declines.BondsHigh-yield bonds ...
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Home country biasThe latest data from the Treasury shows that foreign investors have been selling U.S. stocks at a record pace. They’ve sold an average of $17 billion per month for the past year.That accounts for about 0.05% of the total market cap of U.S. equities, the most in 30 years. During that time, they’ve proved to be bad market timers, with extremes in their buying and selling activity coinciding with peaks and troughs in stocks.No trustIndividual investors have little trust in ...
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Foreign investors have sold a record amount of U.S. stocks, even accounting for stocks' rising value; Investors in the AAII survey are much less optimistic than usual for a healthy market environment; SPY closed its large gap from Monday; The put/call ratio has been above 1.0 for 7 straight days
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Here's what's piquing my interest on this gap-fill day.ClosureBuyers stepped in big-time and have pushed stocks above where they were before the large gap down on Monday. This is a quick turnaround - it usually takes longer for SPY to close a downside gap that large.When it does so quickly, within a week, it has usually backed off over the next few sessions.That's been the case even if - especially if - SPY was above its 200-day average at the time.Few BullsThe latest weekly survey of ...
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Sundial Capital Research is an independent investment research firm dedicated to the application of mass psychology to the financial markets. Sundial publishes the sentimenTrader.com website.
Our focus is not market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence.
