sentimenTrader Blog


2017-08-05 | Eric Brown | Comments

We’ve just added a new ‘multi-timeframe’ feature to our backtesting engine (see more info about the engine here). This new feature provides a look at various timeframes from 1-Week to 1-Year across the selected lookback period for the backtest.

When you run a backtest now, you will see the backtest results in a tab called Backtest Statistics which contains specifics statistics for the parameters that you chose for the backtest. Another tab, called Multi-Timeframe Results,  provides a look at the backtest across multiple timeframes from 1-Week to 1-Year. Note: the multi-timeframe summary will always include overlapping results regardless of whether you select to exclude them on your backtest.

A few screenshots showing the new backtest results page are below.

backtest results

Backtest Statistics

Multi-Timeframe Results

Multi-Timeframe Results


2017-07-31 | Jason Goepfert | Comments

As mentioned last week, we’ve started a private Twitter feed for premium subscribers, and so if you’re reading this post as it’s published, you have access to that feed at @SenTrader_Prem. Just request to follow that account on Twitter and send us an email at admin “at” sentimentrader.com to notify us of your Twitter handle […]

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2017-07-24 | Eric Brown | Comments

Over the weekend, we added a new backtesting feature to the site.

The current version of the backtesting engine is fairly straightforward. You select an symbol (index, commodity or ETF) and then select the indicator and indicator parameters that you want to backtest.   All fields are required except for the “Indicator Smoothing” dropdown and “exclude Overlapping Observations” checkbox.

A screenshot of the backtest engine setup screen is below.

sentimenTrader backtest engine

When you run the backtest, you’ll see a backtest results screen that provides a summary for the backtest parameters and results for the backtest (include the individual trade specifics).  A sample backtest result for QQQ using QQQ Social Sentiment is provided below.

QQQ Social Sentiment Backtest

 

We are planning some enhancements to the backtesting engine in the near future to make it more powerful and user friendly. A few of these planned enhancements are:

  1. Add a chart to the results page to display index, indicator and trade information
  2. Add more advanced trade statistics (annualized return, average win %, etc)
  3. Add a filter for the index to use to filter backtests (e.g., only consider a ‘trade’ if price is above 200-day moving average)
  4. Provide more insight into the symbol / indicator prior to running backtest (e.,g display chart and info about symbol / indicator when selecting parameters).

 


2017-07-13 | Jason Goepfert | Comments

This afternoon, in association with Bespoke Investment Group and a few other services, we will be rolling out a Premium Twitter feed that interested accounts can subscribe to outside of a regular SentimenTrader subscription.

If you are an existing SentimenTrader Premium tier subscriber, this is available to you at no extra charge. Because of how Twitter handles its user data, there is currently no way to automatically link Twitter to our membership management system, so:

If you wish to follow our Premium Twitter account (@SenTrader_Prem), please request to follow that account on Twitter. You’ll then need to send an email to admin@sentimentrader.com with your name and Twitter handle so that we know you’re already a Premium subscriber.

If you’re not currently a Premium tier subscriber, then you can subscribe to the feed through a company called Premo that partnered with the good folks at Bespoke Investment Group to create a way to manage private Twitter feeds. The cost for the feed itself is $10/month and is handled separately from your regular SentimenTrader subscription. Click here for more info.

Again, if you have a Premium tier subscription, you do NOT need to subscribe to the Twitter feed separately.

That Twitter feed is a more natural extension of what we’re looking at throughout the day than these Notes are. We’re conscious of clogging up your email inbox with Note after Note, so Twitter is a much better platform for quick looks throughout the day.

Also, you’ll see a number of results from the “sentimenTrader Backtest Engine”. Eric is building out a feature to allow you to backtest almost all indicators that we show on the site, and as Premium members you’ll be able to test the full history of the indicators (regular tier members will be limited to two years of history). It’s in the final testing stages and we should be able to roll it out in the next week or two. There are some useful enhancements in store in the weeks after that, as well. I’m personally excited as it’s been extremely helpful already.


2017-07-10 | Jason Goepfert | Comments

Over the past couple of sessions, there have been some notable moves in silver, which seems like it should be a good sign for the metal going forward. There was heavy selling to end the week, then a reversal from a low on Monday. That often signals exhausted selling pressure.

Unfortunately, it hasn’t been so easy for silver. Prior times when it behaved like this, it led to inconsistent results, even a bit weaker than average on some time frames.

In the coming days, we’ll be rolling out a private Twitter feed for premium users, which is an excellent platform for much of what we look at during the day, as opposed to longer-form posts that clog up your email inbox. We should be able to give full details on how to access the feed on Tuesday or Wednesday.

As part of fleshing that out, we posted a couple of studies related to the move in silver, which show just how inconsistent it’s been when exhibiting potential signs of selling exhaustion.

One good sign is that money managers have been giving up on it, so that their proportion of long to short positions is near the lowest levels in several years.

That’s one of the few bright spots, though. Even Monday’s reversal isn’t very intriguing. Other times it reversed from a low, it once again led to wildly different results. That’s not what we look for when trying to find an edge.

Silver has had a better chance at bottoming when our Optimism Index is below 30 and we’re not quite there yet (it closed at 36 on Friday). If it keeps falling in the coming weeks and starts to trigger more signs of excessive pessimism, we’d probably see more consistent signals of exhausted selling pressure than we’re seeing now.


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 split of the most popular fund that bets against the VIX, SVXY. The fund has enjoyed a relentless uptrend as stocks have risen and volatility has collapsed. So they’re splitting the shares 2-to-1 in order to make the share price more palatable for retail traders.

The fund has been split twice before, on September 20, 2012, and January 10, 2014. Both times, it coincided with an almost imminent peak in SVXY, meaning there was a floor under the VIX and a ceiling on the S&P 500.

In 2012, the VIX rose more than 60% and the SPX dropped more than 7% over the next 40 days.

In 2014, the VIX rose more than 75% and the SPX fell more than 5% over the next 30 days.

This is another warning that the low volatility has created a situation that has been untenable in the recent past.


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 has shown that options traders have bought to open fewer than 60 call options for every 100 put options. That ranks as the lowest amount in 15 years. Only the past couple of years have seen days with almost as few calls bought as we’ve seen the past few days.

And for stocks, that has been an excellent buy signal. The S&P 500 has rallied hard after other days the 3-day average was less than 60.

But if we dig into the data, it gets messy. Now that ISE has released the data, we can see that the most active option on Tuesday was on USO, the oil fund, which saw more than twice as many puts traded as calls. So it’s not exactly pessimism on equities that was driving the ratio lower.

The Equity-Only Call/Put Ratio (that excludes ETF and index options) hasn’t been as low as a result. Even though it hasn’t been as low, it has still been drifting lower and is at a point that would suggest that even pure equity options traders are showing some pessimism.

Historically, that has been a good sign for stocks. But not lately. Something has changed with the data over the past two years, and readings of extreme pessimism in the Equity-Only ratio have not consistently led to rallies in the S&P – in fact, it led to declines more often than rallies.

It’s tempting to look at the data and assume it’s a big buy signal for stocks here. But “something” is going on with the data, and we wouldn’t weigh it heavily at the moment.


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, it hasn’t been enough to signal selling exhaustion. Especially since most of the indicators we look at still are not showing excessive pessimism.

Let’s take a look at times when oil initially fell into bear market territory and see if that was enough to provide some relief:

Not really. Oil continued to fall about as often as rebound. Two months later, it was actually down even more the majority of the time and had a terrible risk/reward ratio. Longer-term returns were extremely volatile, with average risk over the next year of nearly -25% versus reward of +33%. There’s no edge there.

How about for stocks?

The S&P 500 index didn’t respond all that well to new oil bear markets. Over the next couple of months, it rallied only 7 out of the 15 times, sported a negative average return and nearly 2-to-1 risk-to-reward ratio. Since 1996, it led to negative returns 8 out of 10 times over the next two months.

How about for energy stocks specifically?

Again, not great. Energy stocks within the S&P 500 did tend to rebound over the next two weeks, up 12 out of the 15 times, but over the medium-term it was mixed. Six months later, Energy stocks were up 13 times, with a good average return and risk/reward ratio, but the losses in 2008 and 2010 were large.

How about Transports? Oil is a cost input so perhaps trucking firms and airline stocks took advantage.

There isn’t much evident of that here. The last three times all led to losses over the next 2-3 months. Transports’ overall average returns were about in line with random, and the risk/reward skews were underwhelming. That was especially the case if Transports were near their highs at the time. So much for cost savings.

There’s going to be an opportunity in this sector before long if the selling continues like this, but so far everything we’ve looked at has been inconclusive, especially on a short- to medium-term time frame. The fall is disturbing for stocks, which have suffered in recent years when oil dropped so much.


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 also an abnormally large number of stocks hitting a 52-week low.

It happened again on Wednesday. Despite the S&P being within 0.25% of its high, more than 3% of its members reached a 52-week low. Almost all of them are oil & gas or retail companies, so perhaps that’s a valid reason to excuse the issue, but almost all “issues” start with one sector and spread to others. Note that in July 2015, it was energy and mining companies that dominated the 52-week low list.

It’s at least worth looking at the few other times we’ve seen this kind of a split with stocks so close to their high. It wasn’t pretty, with one of the most skewed risk/reward ratios we’ve ever seen (due in large part to a cluster of dates in 1998).

The only date that managed a positive return across all time frames was in December 1991, and even those shorter-term gains were mostly given back in the months ahead.


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