On Monday evening, I wrote to subscribers that despite Monday's weakness, our "Best Trend" indicator was not budging. I said that it was going to be hard to get anything worthwhile going on the down side until this positive indicator changes and that is still my position. Now, near-term, the high OEX P/C yesterday implied that the odds of some selling were pretty good and this morning we issued a Fully Long/Fully Short Sell based upon our message board polling. Despite some weakness today, I'm still not going to get excited about the Bearish case. In fact, I'm more likely to buy this weakness than short it. If this was the start of something major, we'd typically see some signs of smart money moving out of the market, but a quick look at cumulative breadth shows very little damage.
I honestly still think the major risk is to the upside, when folks realize that the game is "rigged" and that there is a floor under this market (from all the central banks and sovereign funds directing more assets into the US stock market). When we look at the AAII numbers and only see 38% Bulls after a run like we've had, it sure looks like a lot of folks haven't yet bought into this "riskless" market...
I honestly still think the major risk is to the upside, when folks realize that the game is "rigged" and that there is a floor under this market (from all the central banks and sovereign funds directing more assets into the US stock market). When we look at the AAII numbers and only see 38% Bulls after a run like we've had, it sure looks like a lot of folks haven't yet bought into this "riskless" market...
********************************************************
The FL/FS is flashing a strong Sell. Smart Money is Bearish but so are the Amateurs. TSP is too Bullish. The OEX P/C is very high and Bearish.
********************************************************
Results of the Wall Street Sentiment Survey (formerly known as the Fearless Forecaster Sentiment) taken after the close on 7/03/14:
Response was to this question: "At the end of next week will the S & P 500 close up (bull), down (bear), or unchanged/no opinion (neutral)?"
Weekly BULLS: 39%
Weekly BEARS: 28%
Our `Smart Money' Pollees were 0% Bullish and 75% Bearish.
Our Amateur Trader Pollees were 0% Bullish and 50% Bearish.
The Senticator is Neutral for the market.
The Weekly Sentiment Trading Model was flat.
Past performance should not be considered a guarantee of future returns.
Proprietary Surveys
This week, the WSS Surveyees are leaning a bit Bullish. The "Smart Money" Traders are leaning rather Bearish, and the "Amateurs" are leaning a bit Bearish. This suggests some chop. Maybe even rally. The "Smart Money" guys are inveterate top-pickers which means that they have a tendency to be early. The Senticator is being revamped. All in all, I think this data is consistent with a higher holiday week. Note that these surveys are of a virtually static pool of participants. The same traders and/types of traders have been participating for 18 years now with few additions or subtractions.
Message Board Sentiment:
Message Board Opinion - NEUTRAL.
Bulls 38%
Bears 25%
Actual Position Poll - ST BEARISH, IT BULLISH.
19% Fully Long
19% Partially Long
25% Partially Short
6% Fully Short.
Fully Long/Fully Short: STRONG SELL.
The Fully Long/Fully Short is flashing a strong Sell. The 5-day is now Bearish. As far as I'm concerned, Sells are still a tough trade but Bulls have to be getting nervous as we collect more Sells--nested signals can often mark turns. I think it's early yet, however. The Weekly Fearless Forecaster poll shows 64% Bears, implying some rally this week.
Bottom line: We're short-term Bearish but still intermediate-term Bullish on the stock market unless, or until we see some deterioration in breadth and or our "Best Trend" indicator.
