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Sentiment Random Thoughts


Sentiment surveys are showing low amounts of bullish opinion, and growing levels of outright bets against equities....


  • Sentiment surveys are showing low amounts of bullish opinion, and growing levels of outright bets against equities. Many are now at their most bearish of the move since 2003, and a few are even scraping along close to all-time lows.

  • Put/call ratios have increased to the point of becoming extreme, particularly when looking at options that are bought to open. The ISE Sentiment Index has reached a point that is only comparable to the 2002/2003 low.

  • Volume in exchange-traded funds has been far outpacing that of their underlying components. We see this in times of extreme duress, when traders are searching for the liquidity and ease of trading offered by ETFs as opposed to the individual equities. This data for SPY has reached a point comparable to the lows seen during 2001 – 2003.

  • Odd lot short sales have spiked to all-time record levels, a sign that small traders are aggressively betting against a market rise.

  • Less than 10% of total assets in the Rydex mutual fund family is concentrated in technology funds, a level that has equated well with previous lows in big tech stocks. Overall, Rydex traders are positioned about as defensively as any time over the past few years.

  • Longer-term, however, we are still seeing excessive speculation in micro-cap stocks. April recorded a huge spike in OTC volume, and the subsequent market decline has tempered that enthusiasm somewhat, but not completely.

  • Liquid assets (i.e. cash) at mutual funds, even after adjusting for the level of short-term interest rates, are at historic lows and over the past 50 years, this has lead to very muted market returns going forward.

  • Margin debt is high, but so is the level of cash sitting in brokerage accounts. This is not necessarily bullish or bearish, but comparisons to the high margin levels in 2000 are misguided
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No positions in stocks mentioned.

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