Thread: Bear Cave 2 (Bull Allowed)

Insiders are also cashing in shares.....

Stocks are hitting new highs, but there's one group that looks like it's sitting out - the smart money. Even as stocks ticked at records last week, the Smart Money Index (SMI) was languishing near its lowest level in a year.

The idea behind this indicator, popularized by money manager Don Hays and existing with many variations, is that emotional trading takes place at the beginning of the trading day (as traders react to overnight news events and economic releases) while the "smart money" takes the day to evaluate price action and input their orders before the market closes. That concept may seem quaint now in the era of passive funds overwhelming late-day volume, so perhaps this view is no longer accurate.

Regardless, it's unusual to see stocks rally so hard and the SMI sell off so drastically. Using Bloomberg's version of the index, we can see just how wide this disparity is now

https://www.sentimentrader.com/blog/...s-record-high/

Why are the commercial positions so large on this chart? Well, see the chart above for clues..... Which is the bigger Market - the bond market or the stock market?

Current Commitments of Traders Charts

Originally Posted by robo

Most investors love stocks right now, and the Fed continues to pump money to their primary dealers.

Tech stocks trading at 1,000+ P/E's are sure to fall from grace, but short sellers keep getting gassed out by some serious recency bias (BTFD), FOMO and seasonality tailwinds in effect.

"Buy TSLA and retire early, it's so easy OMG I can't believe people lose money in stocks - and bitcoin. They always go up!"

These people have already drunk too much egg nog and will pay handily for their stock market education down the road. It is not different this time, just as it wasn't different in March 2020 when a world collapse was considered. In this case, money printing won't bring back the lost jobs and businesses that had to permanently close their doors thanks to poor state management.

Ran into two people from work who I have not seen in years a few days ago. The one was checking his TSP and the other noticed. Next thing you know, it turned into another one of those "how much did you make in 2020" discussions. "Bro, I'm up XX% this year, it's unbelievable. I check it every day"

The one said he got out in February, but never did say whether he got in or not. (I think he was telling the truth but has missed out on the massive ramp up since March.) The other was gloating about his gainz thru some trading service I had never heard of. The one who got out said he had heard of another guy who uses it and made $XXX,XXX.00 this year.

1. FOMO is happening in markets.
2. Don't compare what you have to others.
3. Make sure your foxhole is deep.

Originally Posted by robo

Insiders are also cashing in shares.....

I've noticed the same thing.

"FOMO is happening in markets."

IWM is now 32%ish above it's 200 dma

Look how rare that 32% is on this 20 year chart.....

The SPY is also stretched, but nothing like IWM. All of the risk management indicators I track (risk/reward) are hitting extremes.

However, I trade the trend and it remains up. I have now reduced to only a 10% long position.

Bottom Line: Love it or hate the market trend remains up!

VXF is what I use for the S Fund at Vanguard..... It's around 34% now..... It really is amazing since we are probably in a fairly bad recession and it could take a few years to get out of this mess.....

Amazing in just one year.... 2020 is the year of extremes. Fear and now greed at a rare extreme....

First 38% below the 200 dma and now 34% above........

The SPY is imbedded and is slowly crawling up. The DWCP is in week 5 consecutively above the Bollinger band on a weekly basis which I have never seen over the upper Bollinger band. When it sells off it will be like a thief in the night with no indicator, steep and violent. Keep stop tights on those in the DWCPF.