Wednesday, June 1, 2005


I recently made the statement that the reason Sentiment Indicators were so important to a stock investor was that 70 to 80% of a stock's movement is predicated on the overall market and individual Sector's and Industry Group's behavior, not the stock's fundamentals, although they are important longterm. In my recent column, "Mayday,M'aidez", I made the observation that several of my Sentiment Indicators were at extremes, calling for a market rise: Specialist shorting of stocks vs. Public was at a record 3.67;Investor's Intelligence Bearishness was 29.7%, also a recent record high; Univ. of Michigan Confidence at a record 87.7; and an INVERTED Bull/Bear ratio in the AAII survey!
Since then, the Nasdaq has risen over 9% (not a bad full year return)and still going.
This week, several Indicators have moved into midrange (not quite overbought yet), although the McClellan Oscillator is nearing its upper boundary, and Volume has actually been declining during the upmove. Also, the Nova/Ursa fund ratio is at 24, where it was on April 8, before an ugly downmove. Another notable extreme is the speculative Nasdaq Volume vs. NYSE ( a recent high of 122), and longer term Bullish signs include Barron's newly added Panic/Euphoria chart still barely in Panic mode of -.7 (please see previous blog for parameters), and the Bullish percent of stocks on Buy signals just gave a Buy signal itself at 58. Finally, the delayed Public/Specialist short ratio climbed back up over 3, a contrary signal.
So, the Jekyll/Hyde week so far is probably due to hedge fund profit-taking May 31( a Trillion dollar entity), and start of the month funding and Money Markets (another Trillion dollar entity).
READERS: Now that Haloscan has kindly made it possible to post comments with joining Bloggers, I would appreciate comments such as other favorite Sentiment Indicators that have a proven record, and thought-provoking comments and questions which I'm used to experiencing in the graduate CyberClasses on Technical Analysis that I've been teaching at Golden Gate Univ. the past 5 years.

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