Does the market have your head spinning?
Wednesday started out terribly, giving up all of Tuesday's big gains before a late rally gave those gains right back. The volume is picking up and I think we will be OK as long as the lows made Monday hold up. That's about 1078 on the S&P 500.
We have been discussing investor sentiment on the message board the last couple of days. I think it is one of the strongest indicators available while others think it is overrated. Market strategist Don Hays thinks that sentiment is a great tool but he says polls are not a great way to judge sentiment. He says, don't tell me what investors are saying, tell me what they are doing. So rather than surveys, he likes to look at the put/call ratios (how many put options are bought in relation to the number of call options), Rydex ratios, which measures how much money is put into a bullish vs. bearish mutual funds, and short sales (how many people are selling stocks short -betting they will go down).
The odd-lot sales is an interesting indicator. An odd-lot trader is someone who buys or sells stock in increments of less than 100 shares. So if Joe Sixpack has $1000 to invest and he wants to buy EBAY which is trading at about $80 a share, he would buy 12 shares. That is considered an odd-lot sale. When the odd-lot seller is shorting more than buying, it is a solid contrarian indicator, meaning the market is likely to rally because they are usually wrong near market tops and bottoms.
Chart provided courtesy of www.sentimentrader.com
That's what we are seeing now. The odd-lot sellers are getting very bearish (They think the market is going lower). The last two times they got this bearish was at the May and March lows. Are we at the July lows? By the way, the name of the site I get many of these interesting charts from is called sentimentrader.com. The president of the company, Jason Goepfert, obviously believes in the value of sentiment.
As you may have saw yesterday, I moved back to 75% S and 25% C effective today. My short term timing has been awful lately but if my intermediate term call is correct (which I have been better at), we are at or near a bottom and heading into a new bull market run.
That's all for today. Currently 75% S, 25% C. See you tomorrow or on the message board.
----------------------------------------------------------------------------------------------------------------
Would you like to be on our
email alert
list?
We will send you an email when there is a change to our asset allocation
or market outlook. Input your email address in the form on the top
right of any page and you're in. Your email address will never be
given out.
Read our privacy policy. More details below **.
Like
what you're reading? Tell
a Friend
about us.
-----------------------------------------------------------------------------------------------------------------
Highlights from prior day's comments (see archives on left for full
article):
The great humbler strikes again.
If it wasn't so comical I'd be crying. My timing has been
uncannily bad. The great humbler, the market, continues to put me
in my place. I started thinking the inexplicably weak market was
foretelling of something sinister in the air. Now I believe the
selling was over done because of two things; The possibility of a
security breach, and investors expected the Democrats to use the
convention to tell the people of the United States how terrible the
economy is, how awful the war is going, how taxes are too low, how many
people are out of work, etc., So far so good. It seemed to
be a relief rally.
I don't know if that is the
turning point. We are likely to find out in the coming days.
William O'Neil of Investors Business Daily gives his guidelines for the
sign of a bottom. He says, "the first time an attempted rally
follows through on anywhere from its third to 10th day of recovery," you
should be ready to buy. However, he warns that the follow-through day
should show a volume increase accompanied by a price rise of at least 1%
or more on the Dow or S&P 500.
So it is still too early to tell. But that doesn't make me any
less bullish. I have been expecting the bottom sometime in July
with the completion of the Democratic Convention being about the latest
I'd expect to see it. Sometime between July and August tends to be
take off time during presidential elections. They are pushing it
this year. Here is the average election year action with 2004
action through mid-July.
I won't say too much more
because my timing and calls have not been great lately. I will
just look to get fully invested again for Thursday or Friday. If
this isn't the bottom, so be it. I'm not sitting on the sidelines
too much longer. I will send out an email alert when I make the
move.
------------------------------------------------------------------------------------------------------------------
Chart provided courtesy of www.sentimentrader.com
---------------------------------------------------------------------------------------------------------------------
**
By joining our email alert list you will
get an email each time I initiate a transfer or change our market
outlook. You will also receive an email each Monday morning
reminding you that our comments are updated daily. I will always
send out these emails prior to making the transfer myself but I can not
guarantee you will receive it in time to make a transfer yourself.
By joining you understand that this is what I am doing in my own account
and if you decide to follow our transfers in your
own account, you do so at your own risk. There is always a
possibility for a loss in your account. These transfers could come
very often and you may have to act quickly to make the deadline.
Please consider your investment strategy before taking any advice or
making any transactions. Thank you.