Thread: Using Sentiment as a LT Entry/Exit Point

Either we've seen capitulation or it is still in progress. October was a punishing month for fund managers and it's very difficult to make the argument that capitulation hasn't happened yet.

If you’re looking for evidence of a gale blowing through the financial services industry, you don’t need to look far:

Fund companies are liquidating a huge number of funds. When all share classes are counted, something like 400 funds have been liquidated so far in 2008. In the last month or so, fifteen Reserve money market funds have been wiped out. As has the entire Utopia fund family. Liberty Ridge, successor of the great PBHG funds of the 1990s, is going. Two of three Bjurman, Barry funds. The Sierra Club fund. Analytic Global Long-Short. RS Asset Allocation.

Fund companies, likewise, are liquidating a huge number of employees. The list of companies with substantial layoffs ranges from the industry’s smallest players to its largest.

• American Century is laying off 17% of its workers
• Ariel is laying off 20% of its staff
• Fidelity is cutting 15% of its UK workforce and about 7% of its huge US staff
• Janus announced a 9% workforce reduction
• Legg Mason is cutting 33% of jobs at its Capital Management unit, the investment group headed by Bill Miller
• MFS is laying off 5%
• Putnam is laying off a relatively modest 5%, including 12 portfolio managers, though the changes are linked to changing corporate strategy as much as deteriorating economics.
• The Hartford is laying off 500, about 2% of its staff
• Waddell & Reed, adviser to the Ivy funds, is laying off 15%

Setting up "death watches" is becoming a popular pastime: Morningstar star, for example, started an "ETF Death Watch" to track the rising number of ETFs which are simply not economically viable. By some estimates, that number is creeping up toward 100 – perhaps 15% of all ETFs in existence.

Even reopened funds are experiencing outflows. The 66 funds that have reopened this year have posted a total of $24.3 billion in net outflows year-to-date through Oct. 31. ("More mutual funds reopen for business," Investment News, 11/16/08)

http://www.fundalarm.com/hilights.htm

Originally Posted by Bullitt

Either we've seen capitulation or it is still in progress. October was a punishing month for fund managers and it's very difficult to make the argument that capitulation hasn't happened yet.

http://www.fundalarm.com/hilights.htm

Bullitt,

Folks now want to see the new lows tested on volume before they have the good feeling about buying again. It's never easy picking a bottom is it?

Some comments from Steve below about todays action and yesterday's sell-off. Watched folks on the board sell again before the jobs number and the market rallies. Happened last month also.

"Global equities have been quietly forming a bullish pattern of higher lows." In advance of any widely anticipated bearish news, such as tomorrow’s U.S. unemployment report, frightened amateurs typically unload—and that was the case today. It’s a classic case of “sell on the rumor, buy on the news”.

We might get a retest of 740 folks or we also just might keep climbing the wall of worry and get higher lowers. How long will it take before you get buyer's anxiety and buy? Maybe just before the next sell-off... NO ONE CAN KNOW FOR SURE.....

How could the market rally with all this bad news today? Why isn't it selling off?

Ask optionman or coolhand why they both just went fully long? What the heck are they thinking?

Maybe we will sell back off next week, but if we keep making higher lows its Bullish for a short-term run into the New Year. WE SHALL SEE!

Take care and good trading!

I'm still playing by Bear Market rules for now....

Those few who made the painful decision to buy into the pullback are appropriately rewarded - the financial markets always rally dramatically following any true bottom, so that those who panicked on the way down are punished rather than rewarded.

Originally Posted by Birchtree

Those few who made the painful decision to buy into the pullback are appropriately rewarded - the financial markets always rally dramatically following any true bottom, so that those who panicked on the way down are punished rather than rewarded.

Yep - it never changes. The insiders get richer and Joe Sixpack goes to cash. He then buys back at much higher prices. I know two folks at work that sold very close to the new lows after riding down most of the sell-off.

The insiders are currently buying BIGTIME, and watch out when the whales start buying.


Yeah - we can test the lows again and we can also break-out. We shall see!



Take Care Big Bull!

Originally Posted by Bullitt

Have we hit the Relief stage yet?

I am in denial / fear mode, but I am still on the sidelines so I'd have to turn the chart upside down.

Relief sounds about right, although optimism and excitement are in the air.

I would think we hit the relief stage when we tack on a 5% 3Q GDP.

Originally Posted by Bullitt

Have we hit the Relief stage yet?

Nope. The more I miss this rally the more depressed I get. I'm beginning to see no reason not to be all in.

I call 'Thrill/Excitement' stage here.

Originally Posted by Bullitt

I call 'Thrill/Excitement' stage here.

Just so long as your not in "denial" it's all good!

No Doubt:

this market is truely in denial. but who cares? as long as everyone else is in denial, they will load up. until they can no longer deny the fact that there is no economy, just one big printing press and a lifetime supply of green ink, or is it red?