Investor Sentiment

[tsptalk]

7/22/04
The new AAII Investor Sentiment Survey numbers came out today. These numbers are tabulated with a Wednesday cut off date so I don't know how much of yesterday's (July 21) drop was considered.

Percent of those asked that are Bullish = 36% (down from 47% last week)
Percent of those asked that are Bearish= 24% (same as last week)

If this survey was taken after the close yesterday, I would be worried about the bearish number not being higher. As I've said, we'd like to see that bearish number be closer to 40% for a sign of a bottom. When the Dow was down 100 points again this morning, I'll bet that number jumped to at least 30%.

[Timer]

tsptalk wrote:
7/22/04

The new AAII Investor Sentiment Survey numbers came out today.Tom, where can I look at this Survey? Is this something you subscribe to for a fee?

[tsptalk]

I get it at decisionpoint.com, which is a pay site. You can probably get it at AAII.com also but I believe that is a pay site also.

[Mike]

If the losses / stagnation continue, I'd think the bear sentiment will climb dramatically.

Keep an eye on the F fund - if there's some sort of mass exodus to that fund (Bearish behavior), I'd expect its share price to climb accordingly.

[tsptalk]

I thought the Democratic Convention concluded on July 26th but it actually starts then and ends on July 29. Maybe stepping aside until Friday July 30 or Monday August 2nd is something to consider. That will obviously have to wait for Monday morning to decide.

Something has to get that sentiment down... those stubborn bulls. :oo

[Mike]

Here is an interesting article:

http://biz.yahoo.com/rb/040720/column_stocks_week_2.html

According to this, it appears most investors are simply "waiting for something to happen". And yes, "geopolitical uncertainty" was mentioned as well. Looks like we could be adrift for awhile - in spite of the fact that a number of companies reported solid earnings (this failed to generate much investor interest in the overall market).

[Rolo]

Mike wrote:
And yes, "geopolitical uncertainty" was mentioned as well.
Why aren't we desensitised to that yet? sheesh.





Charles Schwab's Greg Forsythe said that another reason for the market's slowdown is that the so-called 'momentum investors' are staying away.

baha, except this one! :dah: <-- Moi



Frizz --> :dude:

[azanon]

Ok i cant hold off this comment any longer. The bullish/bearish indicator overa very long period of time tends to be a mildly contrarian signal. That being said.... on the shorter term, its very borderline useless IMHO. Why do I say that? My personal experience with my dad which is as follows:

The bulls vastly outnumbered the bears all through the 90s on a day to day basis, and you know what? They were right almost every single day. I remember having to listen to my dad (who owned some common stocks at the time, but was heavy in cash) every day in the 90s about how overbought the market was, how it was going to crash, and howall the greedy bullswas a "negative" indicator. Well, you know what? I watch him "not" make money for a decade for that reason. Oh well sure, he was right by 2000. But i'd still take stocks over bonds in the 90s, heavy positive bulls indicator aside.

Where the indicator might be useful is where greed is obviously rampant as one really could say was the case in late 99, with a glance at the nasdaq chart spike upwards. That being said, the nasdaq is WAY off its all-time high now, so there's no way this exception would be applicable now or anytime soon.

Azanon

[tsptalk]

There is no tell all, be all indicator but I believe investor sentiment is one of the mostpowerful psychological indicators, or any type of indicator, available. Even in the 90's when we had a strong bull market there were periods of fairly stong pullbacks. The fall of 1998 comes to mind. So a buy and hold strategy would have worked very well but you could make better trades if you are timimg the market with this indicator.

I won't write a long explaination why I believe this to be true because I'm guessing youhave formed you own opinion already,but I will say for anyone else reading this that during bull markets, a high bearish percent reading is a great indicator that the bottom is near and during bear markets, a high bullish reading is a sign of a top.Since right now the 3 legs of a bull market I talk about are looking quite strong (psychology is a bit weak because of sentiment)I believe once the sentiment indicator gets to a level where there are more bears than bulls (or close to it), we will be looking at the bottom.

[Rolo]

azanon wrote:
Ok i cant hold off this comment any longer.
heheya...I wondered what that burbling sound was. :D

[azanon]

The bullish/bearish indicator overa very long period of time tends to be a mildly contrarian signal.

Its not my mind made up so much as just a general sentiment in the investor world. My understanding is that it is a mild contrarian signal, not a be-all, end-all trigger to base a timing decision on. I'm sure i could come up with some links to support that if needed. Still, I dont see how that should even benecessary given the rampant bullish attitude that pervaded in the 90s, and the performance that accompanied that attitude. To be honest, i canunderstand how mathematically it could be contrarian at all since when people want more of a stock, the price reacts by going up, not down.

Regarding your comment about pullbacks in the 90s, 1998, whenever, and being able to take advantage of those, my comment to that is that its also relatively accepted that timers generally lose in bull markets. Only a really, really adept timer (or just plain lucky person) could have beaten a buy-and-holder from 1990-1999. The timer's only real chance to beat the buy-and-holder would have been to predict and act upon the overbought condition at the turn of the century. However, if this site's any example, these timers would have just bought it back a week or two later (judging by the frequency of trades here).

I think it only fair to point out the converse;Timers tend to do well in bear markets cause (obviously) they're not always in the market 100% of the time during a downward trend.

azanon wrote:

I think it only fair to point out the converse;Timers tend to do well in bear markets cause (obviously) they're not always in the market 100% of the time during a downward trend.
Oh yeah of little faith. I actually prefer up and down markets like we are having this year. And, since Joel pointed out some inverse funds to the market, I love it even more! :^

[azanon]

Oh yeah of little faith. I actually prefer up and down markets like we are having this year.


Guess that just depends on your perspective. I see it as simply a down market. Look at the dow, nasdaq, s&p 500 at Jan 1, 2004 and look at it today. Did it fluctuate on the way there? Well sure. When does it ever go in a perfect straight line? Being that it is bear so far, if there is a time the strategy on this site should be working, given both the bear market and the fluctuations.... it would be now. I rest my case.

You just contradicted yourself. In a bull market, does it go in a straight line? No? Then I would have the ability to make more than buy and hold don't ya think? I rest my case. :l

[Pete1]

mlk_man, I was thinking about your strategy, ie, buying when the indexes movea set percentage below the 63 moving average and selling when they move a set percentage above the 63 moving average. I can see how this strategycould workparticularly wellif the indexes are operating within aset range. Do you have rules for when the markets move strongly out of the range? Your strategy could lead to disappointment if theindexes continue to move lower after your buy signal kicks in.

[Rolo]

Uh oh...the line is drawn, and the buy-and-holders are teaming up!

Who's got the popcorn? :D

I am starting to think that moving averages are the way to go, the closest thing to an adaptive,universal, absoute "indicator".

:dude:<-- Frizz B.

[Pete1]

Rolo, I am in no way ganging up. Iam just curiousto find out if he has factored in anescape hatch for a prolongeddownward turn, ie, time to comein fromthe rain. :)

That's why I use both Rolo. If you see that the market is trending up, you just in and ride. Like Aug 2003 to Jan 2004. Could I have gotten in and out because of my system a couple times when the market dipped? I don't know, wasn't doing this then.

Then if the markets are trending down, just stay out and in the G or F. I'm considering setting a downward "cutoff" at .50 below my 63-day moving, but I think I'll jjust watch the moving averages and go back that.

The .30 above and .20 below have worked well this year because of the up and down status of the markets. Unlike azanon, I believe the markets are trending sideways not down. http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=sp500

[Rolo]

Pete1 wrote:
Rolo, I am in no way ganging up.
hehe, I did not mean to imply anything with my comic relief. I think it is great Az has a buddy to back him up... he'll look less Quixotic in this high-tech, break-neck, day-trading, hyphenated-word world. :D

[azanon]

You just contradicted yourself. In a bull market, does it go in a straight line? No? Then I would have the ability to make more than buy and hold don't ya think? I rest my case.


When did i say in a bull market it goes in a straight line (i'll help you, i didnt). In theory, would you have the ability to make more than me in a bull market. Yes. In practice? I seriously doubt it.

I guess things will never change. Everyone seems to know what the market is going to do tomorrow. On any given day, i can always find two experts (that really are experts) in the world of investing that have a dichtomous view of what's going to happen tomorrow.

[azanon]

I think it is great Az has a buddy to back him up...

......as if you dont agree with me on quite a bit of this.

Sorry, as for disappointed, who would be more disappointed, the person who saw his share price drop from $13.22 to $12.18 (-7.87%) with buy and hold, or the person who got out at $13.07 (an actual gain of 2.27%) and then got back in at $12.63 and watch it drop to $12.18 (-3.56%)? I'll take the latter. :^Plus, when I actually "sell" my shares, that -3.56% is wiped out with a gain. Not losing any shares remember.

Sure it would of been nice to wait till it fell to $12.18 per share to buy into it, but show me someone who knew it would fall that far and I might just start believing in psychics. :D

azanon wrote:

Guess that just depends on your perspective. I see it as simply a down market. Look at the dow, nasdaq, s&p 500 at Jan 1, 2004 and look at it today. Did it fluctuate on the way there? Well sure. When does it ever go in a perfect straight line? Being that it is bear so far, if there is a time the strategy on this site should be working, given both the bear market and the fluctuations.... it would be now. I rest my case.

If it fluctuates going up and down, why can't I make more money in either? Show me your returns at the end of the year, we'll see who did better. I'm onlly trying to help others. You're just pissed cause your losing! :P

[azanon]

If you're consistantly beating the s&p500 over the long term milk man, by all means, market time away. I'm far more concerned with trying not to lose, than I am trying to win, so i'm perfectly willing to accept the long-term returns of the s&p500, and go about my business in this world enjoying other things. As far as day-to-day fluctuations go, if i did watch what happened every single day, i'd probably end up irrationally selling when the price is lowest. In my short investment tenure so far, by best returns have come from investments i had the patience to leave alone for a long period of time. Your experience may vary.

[Rolo]

mlk_man wrote:
That's why I use both Rolo. If you see that the market is trending up, you just in and ride. Like Aug 2003 to Jan 2004. Could I have gotten in and out because of my system a couple times when the market dipped? I don't know, wasn't doing this then.
I am learning, albeit the hard way as many of us must experience, that different markets require different strategies. I would say that in a raging bull market that is mostly linear, a "just let it ride" strategy is best suited. I did water down my gains with timing in 2003; I clearly could have made 150% rather than 75% (I was making that for a while).

When momentum clearly sputters, it is time to change tactics. In hindsight, given this waffling market (and it was early in it that we knew it would do this), more sensitivity to changes and moving averages is in order. (Okay, so it took a few months and several thousand dollars for me to learn this, but I think I got it now! I also "got" that I need to learn more quickly.;) )

I do not have the über-plan, however, by observing the market, others' ideas, and attempting my own, it is under development. I think that is pretty much what we are all doing. (Except for Az :Dj/k)

[azanon]

If it fluctuates going up and down, why can't I make more money in either? Show me your returns at the end of the year, we'll see who did better. I'm onlly trying to help others. You're just pissed cause your losing!

Even the sun shines on a dogs ass some days.

Yepper, but most dogs would rather sit on there a** and lick their nuts than do anything to help their owners future. :cool:

[azanon]

haha, nice. :^

[tsptalk]

azanon wrote:
I think it only fair to point out the converse;Timers tend to do well in bear markets cause (obviously) they're not always in the market 100% of the time during a downward trend.


That's a great point. The only way to beat the market is to be out when it is going down.

Knowing when we are in a bull or bear market and taking advantage of it will help the longer term investors greatly. Just a couple of adjustments here and there will do wonders for an account. I admit the minute tweaking isn't adding much to my return, but it has helped, and a switch in my bias at the right times over the years it has been an even greater help. Some years better than others. Sometimes it hurts (2001, ouch). But it does keepme on top of the market by following it. This year has been a tough trading environment for me but we are at a point where some are saying we are entering a bear market, yet I say not so fast.

(For the record, I think we are still consolidating within a bull market and NOT going into a bear market, so buy and holders should be fine this year.)

But think of the possibilities.If we were entering a new bear market, the buy and holders would be sitting ducks. If we are still merelyconsolidating it is a great buying opportunity and time to get aggressive. Because I have indicators (and sentiment is one) I can make a decision and act accordingly. Buy and holders may get more sleep than I do but they miss those opportunities to move aside or get more aggressive at key moments. Right now I believe we are at one of those key moments.

Hot dawgs! (In my best Shea Stadium accent). Get your hot dawgs. Rolo, you ready for another one? :)

[azanon]

If we were entering a new bear market, the buy and holders would be sitting ducks.

I guess with a 30-year pre-retirement investment horizon, I just dont feel that vulnerable to short-term volatility. Reminds me of that movie Denzel played in where that demon was going around possessing people; remember his song? "Time...eeee is on my side... yes it issssss!"

My approach is boring, plain, and generic, but the approach that makes the most sense to me is 110-your age goes in common stock, and a properly diversified portfolio in foreign and domestic securities, including stocks, bonds, real estate, and maybe even a sprinkle of precious metals. Rebalancing one's portfolio ensures that you will sell when the price is high, and buy when the price is low.

The folks you need you most are the G fund lovers that pervade throughout the federal government. Those that have a portolio like i described; pure buy-and-hold diversification, are way ahead of the game, if you ask me.

[tsptalk]

azanon wrote:
I guess with a 30-year pre-retirement investment horizon, I just dont feel that vulnerable to short-term volatility. Reminds me of that movie Denzel played in where that demon was going around possessing people; remember his song? "Time...eeee is on my side... yes it issssss!"

My approach is boring, plain, and generic, but the approach that makes the most sense to me is 110-your age goes in common stock, and a properly diversified portfolio in foreign and domestic securities, including stocks, bonds, real estate, and maybe even a sprinkle of precious metals. Rebalancing one's portfolio ensures that you will sell when the price is high, and buy when the price is low.

The folks you need you most are the G fund lovers that pervade throughout the federal government. Those that have a portolio like i described; pure buy-and-hold diversification, are way ahead of the game, if you ask me.

Yes, the G funders were my main target for this site. But when the S&P 500 was down 50% and the Nasdaq 78% from top to bottom, I just can't see sitting and watching. Even a diversified account got hit pretty hard.

[azanon]

But when the S&P 500 was down 50% and the Nasdaq 78% from top to bottom, I just can't see sitting and watching. Even a diversified account got hit pretty hard.

It was just as insane to be in the market from 1/1999-12/1999 as it was to be in it from 2000-2002, for obviously different reasons. the way i see those drops is, no one should have been up that much in the first place, so the "crash" was just bringing the market down to planet earth.

Does that make sense? If you're argument is that it was insane not to sell after 2000, i say fine. But I dont see how this so called "rational" person would have also been in the market from 98-end of 99 given the extreme overvalued levels of the market at that time. Granted it went up anyway, but such is the nature of the market and such is why timing is a fools game.

I was in during both the bad and the good of that period cause i was buy and hold. It all evened out.

[tsptalk]

azanon wrote:
But I dont see how this so called "rational" person would have also been in the market from 98-end of 99 given the extreme overvalued levels of the market at that time.
Yeah, I missed someof the 1999 21% gain. I was getting conservative around May of that year. I remember because I sold my kids' mutual funds and the market went up for about 6 or 8 months after. I was not happy but of course I ended up doing the right thing because of 2000-2002. Missing those gains in 1999 did hurt but I actually managed a 4.5% gain in 2000 in my TSP account. I'm more proud of that gain than the 39% I made in 2003.
But I started to get bullish too early andtook more losses in 2001 and 2002. Overall I didslightly better than a hypothetical diversified account from 2000-2003 (The S and I funds weren't available until mid 2001). Considering the carnage in the market, it's not too bad and timinghelped. The 39% gain in 2003was sure nice but the point is I was able to shift gears at the right time. Like you said, the G funders didn't do that.

*Total 2000-2003
My Return G Fund FFund C Fund S Fund I Fund 20% Each
3.74% 22.62% 39.24% -19.84% -10.37% -22.36% 2.37%

http://www.tsptalk.com/returns/returns2.html

* I didn'tstart tracking my returns until 2000.

[Rolo]

azanon wrote:
but the approach that makes the most sense to me is 110-your age goes in common stock
What is the modified formula if you expect to plotz by 60, on the outside? :shock:

(If I manage to make it that far, I will pick up every vice known to man!)

[Rolo]

tsptalk wrote:
Hot dawgs! (In my best Shea Stadium accent). Get your hot dawgs. Rolo, you ready for another one? :)

Yes I am! So ready, that I didn't sell all my stuff! (tee hee...had to be said)

[azanon]

What is the modified formula if you expect to plotz by 60, on the outside?

Not sure what you're asking. Stocks keep up with inflation better than anything. Someone in good health that retires moderately early can expect to live maybe 40 years or more after retirement, so inflation protection still is important. Its a common misconception to think its wise to move out of stock when you retire. 110- your age is perfectly appropriate till you are pushing up daisies.

No one's saying you have to hold the maximum growth stocks at 60+. The actual kinds of stocks you own can have a tremendous bearing on your risk. Head on over to the retire early homepage, and you'll find plenty of old timers that still have 40-60% stock.

Azanon

[Rolo]

hehe...I am being a little facetous...What I am saying is that the IRS expects me to live to 83. I am thinking 60 max, but an anyeurism is likely in my late fifties. :s My point is differing time horizons.


[line]


Reverse Psychology Rules Stocks
BY JONAH KERI

INVESTOR'S BUSINESS DAILY

No good luck charm will help you for very long in the market. To succeed at investing, rely on objective analysis. That means looking at price and volume cues from the major indexes and individual stocks.

The market also offers a slew of secondary measures, which can help you assess the investing landscape. When used correctly, these psychological indicators usually are contrarian gauges. In other words, when they move one way, the market often moves the other.

To find these indicators, go to IBD's General Markets & Sectors page, B2 in the print edition. Here's a quick rundown:

• Nasdaq volume vs. NYSE volume: Nasdaq stocks now garner a lot more daily volume than their NYSE counterparts. Former big names like Cisco (CSCO) and Intel (INTC) may no longer be market leaders. But big-money investors still trade a huge number of shares daily.

There's no hard and fast rule for measuring the volume ratio between Nasdaq and NYSE stocks. But in general, when NYSE volume approaches or exceeds Nasdaq volume, you may be near a market bottom. When Nasdaq volume jumps while NYSE trade stays tame, you may be looking at a market top. The five-year low occurred a month before the market took off in October 1998. The indicator flashed a one-year low on Sept. 17, four days before the market hit bottom last fall.

http://www.investors.com/images/editimg/corner/corner0606.gif

• Public/NYSE specialist short sales: Excessive shorting often foreshadows a market bottom. When the public starts selling loads of borrowed shares (in hopes they'll drop lower) relative to shorts by NYSE specialists, you're near the end of the decline. Why? The crowd is always wrong.

The public is expressed as the numerator, specialists as the denominator. So this contrarian gauge shoots up when individual investors are sure the market can only go lower. The ratio hit a five-year high in September 1998, a month before the market launched into a roaring new bull. The highest level in the past year? The ratio hit 1.5 on Sept. 21, the exact bottom after the terrorist attacks.

• Put/call premium ratio: A cousin of the put/call volume ratio, this gauge compares the premiums paid on all puts vs. calls. The calculation is more complex than the put/call volume ratio. But like other contrarian indicators, we often see this ratio hit extreme levels near a market turn. It spiked to a five-year high three months before the market sold off in late 1997. It hit a five-year low six weeks before the 1998 bull.

• NYSE short interest ratio: This gauge measures the total number of shares being shorted vs. the NYSE's average daily volume. A value of 4 means four days' worth of short interest.

The bigger the number, the more shares traders are shorting as they turn bearish. Also, the bigger the number, the more buying it takes traders to cover those short positions in the event of a rally. As the ratio starts to spike up, a new bull market may soon arrive.

[tsptalk]

Sure Rolo. You just killed my Wednesday night comments :). I saw that on sentimentrader.com yesterday. Good stuff. Thanks.

[Rolo]

tsptalk wrote:
Sure Rolo. You just killed my Wednesday night comments :). I saw that on sentimentrader.com yesterday. Good stuff. Thanks.
ROFLMAO!

The extra-funny thing is that I have been seriously neglecting reading my IBD, so it's not like I am saturated with information or anything!

Aw man that is funny.

[tsptalk]

tsptalk wrote:
Ibelieve once the sentiment indicator gets to a level where there are more bears than bulls (or close to it), we will be looking at the bottom.

The latest AAII investor survey numbers are in, 34% bullish, 36% bearish. Good news.

[azanon]

The latest AAII investor survey numbers are in, 34% bullish, 36% bearish. Good news.

No comment. :P

[Rolo]

azanon wrote:

The latest AAII investor survey numbers are in, 34% bullish, 36% bearish. Good news.

No comment. :P

hehehehehe...sure that's not upsidedown? umopepisdn?

[tsptalk]

azanon wrote:

The latest AAII investor survey numbers are in, 34% bullish, 36% bearish. Good news.

No comment. :P

:l

[tsptalk]

AAII Investor Sentiment Survey results, 39% bullish, 40% bearish. Both higher than last week but the 40% bearish is a good sign. And remember, this survey was taken the day after the 130 Dow gain.

[Rolo]

tsptalk wrote:
...is a good sign.
hehehe...That statement has been said so much that it has lost all meaning.

I am bitterly neutral. I have never been neutral on anything, so this is really weird. I cannot say I care for it either. :?

[tsptalk]

Rolo wrote:
I am bitterly neutral. I have never been neutral on anything, so this is really weird. I cannot say I care for it either. :?

I'll take that as a good sign :D

[Rolo]

tsptalk wrote:
I'll take that as a good sign :D
LOL!

My sentiment is in the crapper. I haven't even been watching the TSP funds...(funny..been seeing the share prices all day writing my Quicken-import-dealie)...do I want to stay in the dark? I'm still S, but I hold very few stocks otherwise.

[tsptalk]

tsptalk wrote:
AAII Investor Sentiment Survey results, 39% bullish, 40% bearish. Both higher than last week but the 40% bearish is a good sign. And remember, this survey was taken the day after the 130 Dow gain.
I wrote theabove poston August 12. That was when we put in the last bottom. This week's numbers just came in at 41% bulls, 39% bears. Compare that to last week's 51% bulls and 27% bears and you can see that investor sentiment is back on track for a rally. Great news!

Remember, the more bears (those that think the market is going to go down) the better for the market. 40% seems to be a good indicator that the downside action is limited and a rally is close at hand.

[cowboy]

Cool!!! I like that!!! Market may go up again if so I may buy back in on Monday. Thanks Tom!:)

[Mike]

Green is the best m&m, and it's the best color to see on the charts. :D

[cowboy]

Mike wrote:
Green is the best m&m, and it's the best color to see on the charts. :D



Yes it is cool!! The thing is it has went up so fast this morning can it hold these nice gains. I guess both political parties think they are winning the election. But I think the market needs to take a breath again.:^

[Boots]

Tom,

You mentioned AAII.com earlier in this thread. Do you know much about them?