AI
Wednesday, October 19, 2005 6:02:23 PM
10 REASONS WHY YOU SHOULD NOT LISTEN TO THE BEARS!
from the WALL STREET COURIER
THE SITE OF TECHNICAL MARKET INDICATORS
Charts of Interest
I find this very interesting as it just continues to confirm that you can never be on the right side of the market these days. Even with all the technical indicators available, support and resistance lines it seems that the all too common retail investors gets led into what should be a profitable position which quickly reverses course. Shorting after a decline and a break of support was too good to pass up for more hesitant retail traders always looking for confirmation.
Sometime it is good to follow the indicators and sometimes it is better to fade them. The key is knowing that important piece of data that is moving against the current.
Personally I'm still hesitant about this rally even after holding over the weekend and now going into a full week. The gut says one thing but ration says another.
(October 2005) Short sales by NYSE specialists (smart money) fell to a historical low according to the latest NYSE Member report by the SEC. The ratio fell now to its lowest level since at least 1943, when reliable records of the indicator were first compiled. Not even during the vicious 1973-1974 bear market we saw such low readings of this indicator. On the other hand, short selling by the public (dumb money) exceeded the redings after the 9/11 terror attack.
(October 2005) The chart below shows you the short sales ratio of NYSE specialists (smart money) and the public (dumb money). These readings are unprecedented in market history and they do not appear at tops.
(October 2005) The chart below shows you the short sales ratio of NYSE members (smart money) and the public (dumb money). NYSE members are all the well known broker firms. They have a lot of inside information and the best brains working for them. These readings are also unprecedented in market history and they do not appear near tops.
(October 2005) Odd-lot investors, the smallest of the small guys, (dumb money) are short like never before. It would be the first time in market history if these guys would be right.
(October 2005) The chart below shows you that odd-lot investors, the smallest of the small guys, (dumb money) are afraid to buy right now. Low readings of this indicator appear near market bottoms and high readings appear near tops.
(October 2005) The NYSE Members Report is compiled by the SEC and issued about two weeks after the applicable date. This indicator is a useful tool to determine what the experts are doing. If specialists, floor traders and other members of the New York Stock Exchange are shorting heavily the market is usually ripe for a correction. On the other hand, if they are doing relatively little shorting it is most likely that the market has hit bottom, especially if public- and odd-lot short sales increase at the same time. This is an excellent indicator of the prevailing sentiment of the market pros. We also use special moving averages to push the tops and bottoms forward an extra two weeks or so. This indicator is now outright bullish.
(October 2005) The call/put ratio of all OEX options is at a 2-year low.
(October 2005) The Global Futures Fear Indicator is a proprietary indicator of Global Futures and not available anywhere else. It was unknown until now to the investment community and to our knowledge there is no previous mentioning of this indicator in any financial publication. The Global Futures Indicator gives buy signals when it has readings between 0 and 10. This reliable indicator dipped into bullish territory after last week's sell-off.
(October 2005) A good sentiment indicator is the Rydex Nova/Ursa ratio because it is backed by hard cash and not just polls. It reflects the sentiment of the small guys who put their money into funds. Speculators who invest in the Rydex Nova fund are considered bullish on stocks because the fund has a target performance benchmark equal to 150% of the S&P 500 index (SPX). The Ursa (bear) fund is designed to provide a performance inverse to that of the SPX by using a combination of short selling and options on stock index futures. Investors in this fund are considered bearish on stocks. Specifically, we divide the total assets in the Nova fund by the total assets in the Ursa fund to arrive at a Nova/Ursa ratio. A high Nova/Ursa ratio indicates an extreme amount of optimism (everyone investing in Nova) and a low Nova/Ursa ratio indicates an extreme amount of pessimism (everyone flocking to Ursa). As can be seen in the chart below of the Nova/Ursa ratio, the small guys are getting more and more bearish and that's bullish for a contrarian (daily chart of Dow Jones enclosed for comparison).
(October 2005) When downside volume accounts for 90% or more of total NYSE volume, technicians talk about a wash-out or selling climax. In recent decades, a 90% down day meant a low was at least near, if not at hand. The Chart of Interest below shows you the last four selling climaxes and they indicated that downside risk was limited afterwards. (Chart of Dow Jones enclosed for comparison)
from the WALL STREET COURIER
THE SITE OF TECHNICAL MARKET INDICATORS
Charts of Interest
I find this very interesting as it just continues to confirm that you can never be on the right side of the market these days. Even with all the technical indicators available, support and resistance lines it seems that the all too common retail investors gets led into what should be a profitable position which quickly reverses course. Shorting after a decline and a break of support was too good to pass up for more hesitant retail traders always looking for confirmation.
Sometime it is good to follow the indicators and sometimes it is better to fade them. The key is knowing that important piece of data that is moving against the current.
Personally I'm still hesitant about this rally even after holding over the weekend and now going into a full week. The gut says one thing but ration says another.
(October 2005) Short sales by NYSE specialists (smart money) fell to a historical low according to the latest NYSE Member report by the SEC. The ratio fell now to its lowest level since at least 1943, when reliable records of the indicator were first compiled. Not even during the vicious 1973-1974 bear market we saw such low readings of this indicator. On the other hand, short selling by the public (dumb money) exceeded the redings after the 9/11 terror attack.
(October 2005) The chart below shows you the short sales ratio of NYSE specialists (smart money) and the public (dumb money). These readings are unprecedented in market history and they do not appear at tops.
(October 2005) The chart below shows you the short sales ratio of NYSE members (smart money) and the public (dumb money). NYSE members are all the well known broker firms. They have a lot of inside information and the best brains working for them. These readings are also unprecedented in market history and they do not appear near tops.
(October 2005) Odd-lot investors, the smallest of the small guys, (dumb money) are short like never before. It would be the first time in market history if these guys would be right.
(October 2005) The chart below shows you that odd-lot investors, the smallest of the small guys, (dumb money) are afraid to buy right now. Low readings of this indicator appear near market bottoms and high readings appear near tops.
(October 2005) The NYSE Members Report is compiled by the SEC and issued about two weeks after the applicable date. This indicator is a useful tool to determine what the experts are doing. If specialists, floor traders and other members of the New York Stock Exchange are shorting heavily the market is usually ripe for a correction. On the other hand, if they are doing relatively little shorting it is most likely that the market has hit bottom, especially if public- and odd-lot short sales increase at the same time. This is an excellent indicator of the prevailing sentiment of the market pros. We also use special moving averages to push the tops and bottoms forward an extra two weeks or so. This indicator is now outright bullish.
(October 2005) The call/put ratio of all OEX options is at a 2-year low.
(October 2005) The Global Futures Fear Indicator is a proprietary indicator of Global Futures and not available anywhere else. It was unknown until now to the investment community and to our knowledge there is no previous mentioning of this indicator in any financial publication. The Global Futures Indicator gives buy signals when it has readings between 0 and 10. This reliable indicator dipped into bullish territory after last week's sell-off.
(October 2005) A good sentiment indicator is the Rydex Nova/Ursa ratio because it is backed by hard cash and not just polls. It reflects the sentiment of the small guys who put their money into funds. Speculators who invest in the Rydex Nova fund are considered bullish on stocks because the fund has a target performance benchmark equal to 150% of the S&P 500 index (SPX). The Ursa (bear) fund is designed to provide a performance inverse to that of the SPX by using a combination of short selling and options on stock index futures. Investors in this fund are considered bearish on stocks. Specifically, we divide the total assets in the Nova fund by the total assets in the Ursa fund to arrive at a Nova/Ursa ratio. A high Nova/Ursa ratio indicates an extreme amount of optimism (everyone investing in Nova) and a low Nova/Ursa ratio indicates an extreme amount of pessimism (everyone flocking to Ursa). As can be seen in the chart below of the Nova/Ursa ratio, the small guys are getting more and more bearish and that's bullish for a contrarian (daily chart of Dow Jones enclosed for comparison).
(October 2005) When downside volume accounts for 90% or more of total NYSE volume, technicians talk about a wash-out or selling climax. In recent decades, a 90% down day meant a low was at least near, if not at hand. The Chart of Interest below shows you the last four selling climaxes and they indicated that downside risk was limited afterwards. (Chart of Dow Jones enclosed for comparison)
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