April 25, 2006
Popular Sentiment Growing Ever More Complacent
I was interested to read that “the American Association of Individual Investors (AAII) Survey showed bears outnumbering bulls by a 41% to 34% margin.” I think it’s unusual to have more bears than bulls (by any margin) in the AAII survey.
My own sentiment index, which is based on a media survey, is showing a very different picture.
Cat: | Time: 10:26 am (utc+8)
April 25th, 2006 at 2:11 pm
Nah, the ISE Sentiment Index and VIX are also both showing a lot of complacency / bullishness. Can you point me to another sentiment indicator which is bearish right now?
April 25th, 2006 at 7:13 pm
the good old days of contrarian thinking…”when everybody has already bought, who’s left to buy?” nowadays it seems, no prob, there is always someone left to buy because there’s so much cheap money around…on the other side, the saying “the crowd is always wrong at major market turning points” seems to hold true, at least was true for march 2000 and for early 2003…
April 25th, 2006 at 7:48 pm
Peter: I try to avoid repeating those clichés, though I’d kind of like to revive the saying “you can’t keep a squirrel on the ground,” which was apparently the standard explanation back in the 1950s when the market went up (according to Ray DeVoe).
April 26th, 2006 at 3:43 am
How so? ISE 21/10/5 MA are all very close to bullish extreme signals. So is LowRisk’s sentiment gauge.
April 26th, 2006 at 7:56 am
My own market data sentiment measures, the inspiration for which came from The Chairman, are showing bullish complacency and have done so since late December with brief “time-outs”. One of these I have done since 1996 and another since 2000, so I have a good feel for their ranges and behaviors. But just as crashes normally occur out of oversold conditions, so too do major upside breakouts occur under overbought and complacent conditions. The persistence of current complacency thus causes me to be alert to a possible 1995 type upside outbreak. The odds for a crash or major upside breakout are never high, but when normal relationships start failing: watch out.
April 26th, 2006 at 10:24 am
The only saying I ever heard about a squirrel involved getting a nut.
April 26th, 2006 at 11:12 am
How so? ISE Sentiment Index 15/21 day MA are showing quite a bit of fear/bearishness. So is LowRisk’s sentiment measure.
April 26th, 2006 at 2:53 pm
Babak: Can you link to this LowRisk indicator? I’ve never heard of it.
April 26th, 2006 at 4:08 pm
how to measure sentiment ? my opinion is, you can only take the VIX here, cause it shows the demand for put options…of course, the big institutions don’t demand puts, but there is a subgroup that is still playing options. if you see this subgroup as a significant sample, it represents the whole group of market participants. and the VIX has quite a bit moved up from the low around 10..if you compare the SP500 with the VIX over the last 6 month, theres a “divergence” already
heres a link http://www.cboe.com/micro/vix/pricecharts.aspx
May 8th, 2006 at 2:31 pm
I wrote an entry about the most popular sentiment measures - including LowRisk.
May 8th, 2006 at 2:58 pm
Babak: Nice to see you’re off the blacklist. ;-) Thanks for the links.
May 15th, 2006 at 9:12 am
[…] If the market has been in the panic zone for the last year, then I’d hate to see what a euphoric market looks like. Barron’s should consider publishing something useful like the MaoXian.com Sentiment Index. Cat: […]
May 18th, 2006 at 7:16 am
[…] It’s hard to make a list of Notable New Highs when there are no new highs. ;-) This kind of broad-based selling on a global scale can only happen when the mood is excessively complacent, which at least one guy have been warning about. The April highs may have marked the highest levels the markets will reach in 2006. […]