vlogolution network » market crash

Bullish Sentiment Reaches Highest Level Since April

Alexander P Morris — Mon, 31 Oct 2011 01:39:01 +0000

(RobertSinn) “Notice that bullish sentiment in the AAII survey tends to serve as a leading indicator, however, it should be noted that the last time bearish sentiment was as low as it is now the S&P 500 ($SPY) suffered a 4-5% pullback in mid-July..”

“I can honestly state that one of my biggest mistakes during the past month was not paying enough attention to the record low net long exposure of hedge funds and the record bearish sentiment of active managers as seen below..”

“Sentiment is just one tool among many in a market participant’s arsenal, however, it increases in importance at market extremes/inflection points..”

Full Story: Bullish Sentiment Reaches Highest Level Since April (RobertSinn)

Other sentiment readings to keep an eye on include COT (Commitment of Traders) exposure – where Large Speculators (ie. hedge funds). I’ve often noticed that when Large Speculators on the COT reports are heavily bullishly or bearishly positioned, it tends to lead to sharp reversals in the not-to-distant future. Last year’s Euro crisis was another great example of this.

One more great site for Daily Sentiment Data is Market Harmonics. They offer free proprietary NASDAQ Daily Sentiment Index, Rydex Nova/Ursa Sentiment Indicator (S&P 500 Sentiment), and Option Buyers Sentiment Gauge (OBSG) charts, to name just a few.

Insights to Identifying Potentially Lasting Market Bottoms

Alexander P Morris — Thu, 16 Dec 2010 00:40:39 +0000

Back in February 2009, with the markets plunging relentlessly day after day, after day… I still recall how many traders were waiting in anticipation for some sort of crazy, panicky, high volume day to mark a capitulation bottom. This latest market downswing took the DOW down nearly 30% in just over two months from 9,088 to a low of 6,470 on March 6^th, 2009.

Many traders whose market analysis and insights I respect seemed to be waiting for some massive “fireworks”-type event that would all but shout “THE LOW IS HERE”; a sign that all the weak hands have most likely thrown in the towel, and that it was now time to BUY BUY BUY hand over fist.

Of course, Mr. Market will never make it quite that easy, even for its smartest participants to figure out what its current “jig” will be. The DOW closed below 6,700 for several days before breaking out higher and closing above 6,900 on March 10^th, 2009 on a bit higher average volume. It also marked the first day since this leg of selling began in early February that the DOW was able to close above its downward-sloping trend-line. However, that super-charged high volume capitulation day we were all looking for and expecting to occur never materialized. While in September and October 2008 the VIX volatility index hit highs just over 80, in February and March 2009 the VIX topped out in the low 50’s. This peak was 35% lower than its earlier spikes, even though the market was now trading at lower price levels.

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The Perfect Storm: Lessons Learned from the DOW’s 1000 Point Flash Crash

Alexander P Morris — Wed, 19 May 2010 22:02:53 +0000

Was the May 6^th, 2010 intraday crash and recovery just another one of those once-in-a-lifetime rare anomalies -– a rare confluence of events coming together to form the “Perfect Storm”? And if a “Perfect Storm” generally occurs so infrequently, why does it seem that we are presented with a newsworthy “Perfect Storm” in the markets on an almost regular basis? With all the misinformation and outrageous reasons the media and its “pundits” offer, perhaps it’s time to revisit exactly how markets work, and what (or who) may be to blame. It’s a lot easier to blame a “fat finger” or some naughty short-sellers for a huge market-selloff, than to accept that markets do not always have a buyer for every seller. Very simply, when a large number of market participants decide they all must sell (or buy) at the exact same time, an “air pocket” of price action will form. Anyone who has traded a market knows that this type of single-sided liquidity “crisis” occurs every day in the markets to various extents, especially after significant news events are released. While these relatively smaller moves may not be nearly as significant as a 1000 point intraday drop and overall market selloff, the dynamics are more or less the same. The setup develops with a large number of market participants all thinking the same way (ie. very strong bullish or bearish sentiment), generally due to a strong extended trend in a market. When the market finally turns, the large group of participants on the wrong side of the trade all decide to reverse course at the same time, at similar stop levels, just to save their leveraged hides. Does the trading term “slippage” ring a bell?

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OBAMA WINS 2008 ELECTION AND DOES HOT PIZZA!!!

Alexander P Morris — Wed, 29 Oct 2008 22:00:00 +0000

Barack Obama does hot pizza, and we say keep the change!