Our Sentiment Survey Results 

The S&P 500 finished its second positive week in a row last week.  It was an options expiration week which tends to be more positive than a random week.  This week is now a post-options expiration week which tends to perform below that of a random week. 

The short term market indicators are not at extreme levels, but are leaning toward being overbought - As are the intermediate term indicators.  Trend and momentum traders would say go with the trend and the overbought condition and ride the market higher.  Contrarians and market timers are are likely looking for a temporary pullback.  It's a tough call.

We have followed a few sentiment surveys here in the market comments over the years to use as both a contrarian indicator from the "dumb" money , and as a confirmation indicator from the smart money.  For the past eight months I have been polling our readers with our own sentiment survey on this site to see if we can come up with any consistency between our sentiment and the market.  With eight months of data, I figured it was time to compile the numbers and see what we have.  I hope to create a graph based on this data to make it easier to read.

A couple things to consider about the results:

- As time went on, more people participated in the polls so there is less data in the earlier polls than in the later polls.

- I was ending the polls on Monday evening of the week the survey is effective.  In other words someone could have voted after the first trading day of the week had already completed.  This likely skewed the results some.  I did this to give more people a chance to vote but I am now going to end the polls on Sunday night.

The first thing that struck me was that the results have become more contrarian over the past several weeks, where as in October and November it was quite accurate.

Seven of the last eight weeks that the bulls outnumbered the bears by a 2 to 1 ratio or more, the market was flat to down.  I'll define flat as being up or down less than .25%, or 1/4 of 1%.          

TSP Talk Sentiment Survey Results -

Week			Bulls	Bears	Ratio		S&P 500	S&P 500
From:		To:					gain/loss	Close
02/21/06	-	02/24/06	52%	26%	2.00	-1
02/13/06	-	02/17/06	39%	41%	0.95	-1	1.60%	1287.24
02/06/06	-	02/10/06	34%	45%	0.76	-1	0.23%	1266.99
01/30/06	-	02/03/06	56%	24%	2.33	-1	-1.53%	1264.03
01/23/06	-	01/27/06	40%	41%	0.98	-1	1.76%	1283.72
01/17/06	-	01/20/06	54%	27%	2.00	-1	-2.03%	1261.49
01/09/06	-	01/13/06	60%	19%	3.16	-1	0.17%	1287.61
01/03/06	-	01/06/06	n/a	n/a	n/a	-1	2.98%	1285.45
12/27/05	-	12/30/05	60%	20%	3.00	-1	-1.61%	1248.29
12/19/05	-	12/23/05	61%	14%	4.36	-1	0.11%	1268.66
12/12/05	-	12/16/05	52%	20%	2.60	-1	0.63%	1267.32
12/05/05	-	12/09/05	61%	22%	2.77	-1	-0.45%	1259.37
11/28/05	-	12/02/05	53%	33%	1.61	-1	-0.25%	1265.08
11/21/05	-	11/25/05	69%	19%	3.63	-1	1.60%	1268.25
11/14/05	-	11/18/05	62%	22%	2.82	-1	1.10%	1248.27
11/07/05	-	11/11/05	71%	15%	4.73	-1	1.19%	1234.72
10/31/05	-	11/04/05	60%	28%	2.14	-1	1.81%	1220.14
10/24/05	-	10/28/05	52%	26%	2.00	-1	1.60%	1198.41
10/17/05	-	10/21/05	49%	34%	1.44	-1	-0.59%	1179.59
10/10/05	-	10/14/05	37%	46%	0.80	-1	-0.78%	1186.57
10/03/05	-	10/07/05	n/a	n/a	n/a	-1	-2.68%	1195.90
09/26/05	-	09/30/05	34%	45%	0.76	-1	1.11%	1228.81
09/19/05	-	09/23/05	22%	54%	0.41	-1	-1.83%	1215.29
09/12/05	-	09/16/05	45%	37%	1.22	-1	-0.29%	1237.91
09/06/05	-	09/09/05	27%	58%	0.47	-1	1.93%	1241.48
08/29/05	-	09/02/05	24%	44%	0.55	-1	1.07%	1218.02
08/22/05	-	08/26/05	35%	46%	0.76	-1	-1.20%	1205.10
08/15/05	-	08/19/05	39%	41%	0.95	-1	-0.87%	1219.71
08/08/05	-	08/12/05	26%	58%	0.45	-1	0.32%	1230.39
08/01/05	-	08/05/05	56%	29%	1.93	-1	-0.63%	1226.42
07/25/05	-	07/29/05	47%	34%	1.38	-1	0.04%	1234.18
07/18/05	-	07/22/05	34%	46%	0.74	-1	0.47%	1233.68
07/11/05	-	07/15/05	41%	35%	1.17	-1	1.33%	1227.92
07/05/05	-	07/08/05	42%	29%	1.45	-1	1.46%	1211.86
06/27/05	-	07/01/05	16%	63%	0.25	-1	0.24%	1194.44
06/20/05	-	06/24/05	30%	50%	0.60	-1	-2.09%	1191.57
06/13/05	-	06/17/05	28%	45%	0.62	-1	1.57%	1216.96

In the last four months there were only three weeks where the bears outnumbered the bulls.  Two of those weeks saw very nice gains, +1.60% and +1.76% , and one was flat (up .23%).

There were only two weeks during the eight months where the bears outnumbered the bulls by a 2 to 1 or higher ratio.  One week was flat (+.24%) but the other week the market was up almost 2% for the week.

Like I said, I will try to format this in a way that will make easier to decipher.  Then we can follow the results and see if it helps us out at all. 

A couple of things to keep an eye on this week.  Oil has fallen significantly in February but seems to be trying to bounce here.  Also, the dollar has rallied from the January low and has broken the recent downtrend.  From a technical standpoint the new support area should be between 90 and 90.25, which is the old resistance line, and the 20 and 50-day moving average lines.  But another test of the 200-day moving average isn't out of the question.


                              Chart provided courtesy of www.decisionpoint.com

Why do we care about the dollar?  For the new readers, the dollar has a significant impact on the I fund.  When the dollar is rising it has a negative impact on the shares of the I fund.  When it is falling the I fund benefits.  Of course the stocks of the international markets have a large impact on the I fund as well, don't underestimate the dollar's influence.

We start this post-options expiration week with our sentiment survey at a 2 to 1 bulls to bears ratio.  That's two strikes against the market.  Can the bulls choke up on the bat and come through with a clutch hit, or will data prove correct and we'll see a down week? 

That’s all for today.  Currently 100% G fund.  Thanks for reading.
 

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