DAILY SENTIMENT REPORT

Wednesday, June 12, 2013

8:55 pm EST by Jason Goepfert

Jump to: Risk Summary | Studies & Updates | Equity Indicators | Stocks and Sectors | Commodities | Comments

Headlines Archive

Smart/Dumb
Money Chart
1 Sentiment towards gold is clearly in "extreme pessimism" territory, with
an indicator score showing maximum bearishness only a few weeks
ago. Still, gold has not been reacting well to these extremes. Bear
market behavior

2 The Total Put/Call Ratio has been above 100% for seven straight days
now, which is rare during a bull market. All four other instances saw
stocks chop to a lower low over the next 10-15 days, then form a bottom
(5/22/06, 3/1/07, 8/1/07 and 6/9/11). It was less consistent during a bear
market, but there was still a 5-15 day window when stocks tended to form
a loose multi-week bottoming process.

The Smart Money is 42% confident in a rally.
The Dumb Money is 54% confident in a rally.




Risk Summary

Short-term Risk Level: 3
Info Chart





Intermediate-term Risk Level: 6
Info Chart



Note: The formatting in this sample report is distorted due to the PDF conversion.


Bottom Line
Finally we're seeing something of a confluence of
pessimism on a short-term time frame. When we
see multiple down days like we have, there is a slight
tendency to see some relief, but even more than
that, we're seeing some extremes in sentiment in
what is still an uptrend. It's an iffy one, but as long
Bottom Line (Last changed 06/11)
As has been the case for awhile, mostly we're seeing
negatives on a 1-3 month time frame. The risk level
has decreased a bit due to a slight lessening of
bearish (for the market) extremes, but risk is still
above average. That's because of a still-wide
spread between the Smart Money and Dumb Money,
as the S&P 500 remains above 1600ish, readings
like this suggest a lower short-term risk level.


as well as the numerous Active Studies below that
are clearly skewed to the bearish side of the ledger.
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Studies And Updates Archive


One of the rules of thumb we go back to time and again, on
every time frame, is that a market that continues to rally in
the face of extreme optimism has a low likelihood of an
imminent reversal; a market that continues to fall in spite of
This is very similar to the last bear market. The chart
below shows the same kind of behavior that we're seeing
now. Despite several forays well into extreme pessimism,
traders just kept right on dumping gold. Every time the
extreme pessimism is likely mired in a longer-term bear
market.

That latter one has become a concern for gold.

The chart above shows an aggregate indicator score for
gold. It uses a combination of sentiment surveys covering
a broad population of traders, newsletters and strategists,
as well as traders' positions in gold futures and assets in
the Rydex Precious Metals mutual fund.

A few weeks ago, the score essentially reached 0%. That's
the first time in the score's history - 20 years - that it had
done so. And yet it has been having difficulty maintaining a
rally.

We discussed this almost exactly a year ago. At the time,
gold was acting "odd" in relation to past instances when the
score had become extreme. It simply wasn't responding as
it should, raising the probability that the long-term uptrend
had ended.

We can see from the chart that even though the score has
dipped well into extreme territory several times in the past
year, gold hasn't reacted immediately, like it had for much
of the past 10 years. Even the recent score of 0%,
showing maximum pessimism, has only halted the selling
and not led to a rally, so far.
score touched extreme optimism territory, gold peaked
almost immediately.


Click here to view larger chart

The current high level of pessimism suggests we should
see at least a temporary (1-3 month) counter-reaction in
gold. Perhaps it will lead to something larger and longer-
lasting, but the way price has reacted in the face of
extreme conditions lately is not encouraging.


Related Studies
05/10/13 Precious metals speculators go net short for the first time
(go to top)


Active Studies Retired studies

Bullish for equities Bearish for equities
Date Description Priority Date Description Priority
06/07 Risk Appetite Index shows risk aversion Low 06/10 Cluster of Hindenburg Omen signals Low
05/22 Low OEX put/call ratio during an uptrend Low 06/05 Surge in OTC penny stock volume High
12/12 A new high for the a/d line Medium 06/04 Oversold breadth soon after a 52-week high Medium
05/31 Smart money record short in DJIA and NDX Medium
05/23 Rydex mutual fund traders are optimistic Medium
05/15 Stock / Bond Ratio jumps above 3 Medium
05/13 Stocks and bond yields rise together Low
04/04 Market advisors persistently bullish Medium
03/15 Smart vs dumb money dichotomy Low
03/01 Extremely negative "net worth" Medium
02/07 Mutual fund inflows surge Medium



Equity Market Indicators Complete list

The percentage of our indicators that were bearish (for the market) jumped above 30% in mid-March. That 30% threshold
can be considered extreme, and while the percentage can go higher, to 40% or even higher, stocks usually struggle for 1-3
months after it hits 30%. The S&P 500 did struggle a bit for the next month, not really going anywhere. It has since gone
on to a new high, while the percentage of troublesome indicators has dropped back to a neutral level.



More history: Short-term Score Long-term Score Indicators At Extremes

Indicators At Extremes
* New extreme
Bullish for equities Bearish for equities
* STEM.MR Model - NDX
* Price Oscillator - S&P
* Price Oscillator - NDX
* Intraday Cumulative Tick - NYSE
* Intraday Cumulative Tick - NASDAQ
* Down Pressure - S&P
* Down Pressure - NDX
* Put/Call Ratio - Total of All Options
* Put/Call Ratio - Total of Moving Averages
* ISE Sentiment Index
* VIX
* VXN
Liquidity Premium - QQQ
Up Issues Ratio - NYSE
STEM Model
Inverse ETF Volume
Odd Lot Short Sales
Put/Call Ratio - OEX Moving Averages
Put/Call Ratio - OEX/Equity Spread

NH/NL Ratio - NASDAQ
Sentiment Survey - Market Vane
Sentiment Survey - Consensus
Insider Insights Buy/Sell Ratio
Mutual Fund Flows
NYSE Available Cash

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Stocks And Sectors Sector breadth

For months on end, we haven't seen much of a change in the sector overbought/oversold levels. They have stayed mostly
within neutral territory, or dipping in and out of mild overbought territory. Overall, nothing to be too worried about for a
broader-market perspective.



See this Data Brief for more background on the Sentiment Scores

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Currencies And Commodities Complete list

The latest Public Opinion data show that there was a big reversal in sentiment in the latest week, particularly in the
currencies. The pound, Canadian dollar, euro, franc and yen all showed substantial increases in optimism as they rallied
from extremely pessimistic conditions and are now back into neutral territory.






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