Comments on: RECENT SENTIMENT READINGS FAVOR THE BULLS

By: prescient11

prescient11 — Mon, 20 Jul 2009 21:13:05 +0000

Ignoring any data point is folly, imho.

By: TPC

TPC — Mon, 20 Jul 2009 18:03:10 +0000

Nick,

It’s important to note that these reads appear to be more long-term than anything else. The AAII figures are much more volatile and are a much better gauge of near-term price swings.

Ignoring sentiment is a massive mistake in my opinion.

By: Nick

Nick — Mon, 20 Jul 2009 17:34:00 +0000

With investors turning bullish in 2001 and bearish in 2003, it seems to me that investors have no idea what they are doing. And watching their sentiment as some kind of meaningful indicator makes no sense.

By: TPC

TPC — Mon, 20 Jul 2009 15:31:31 +0000

Aki,

The survey tends to move in line with the ISM prices paid component so its relatively neutral right now. Not much conviction in the inflation or deflation camps.

Dean,

I am not sure how sentimentrader comes up with that indicator. I am just relaying the AAII & Merrill info….

By: Dean

Dean — Mon, 20 Jul 2009 15:02:03 +0000

Are you sure about sentiment readings? It seems opposite of what you are saying(check out sentiment meter on right hand side):

http://www.sentimentrader.com/

By: James

James — Mon, 20 Jul 2009 13:00:08 +0000

There are still a lot of caution out there. As you indicated as well when you said people are still underweight equities and overweight cash and bonds. Crashes don’t occur when a lot of people are still cautious. I am waiting for the day when everyone has their stop losses gone and they will decide to just average down until they have no money left if markets go down…

By: Aki_Izayoi

Aki_Izayoi — Mon, 20 Jul 2009 08:39:13 +0000

I like short EM and China for contrarian shorts, although if I were a global macro hedge fund manager, I would do it by simply shorting an EM ETF, short copper, and probably short AUD vs. USD.

I like long Treasuries for a contrarian long. But US Treasury yields have been rising too along with stocks. I thought the bond market would be able to resist the exhuberance of the equity market.

My other favorite positions do not seem to be contrarian: a falling US equity market, short base metals (slightly contrarian), falling German government bond yields, strong dollar vs. euro and pound,. (I do not know what “overvalued” means; and I most certainly do not like the Big Mac Index as a way of quantifying this. Perhaps wages aren’t competitive in the PIGS nations and they are Europe) . Regarding fund managers who think the Euro is overvalued and the pound is fairly valued, the COT reports currently reveal net long positions in Euro and net short positions in sterling.

If I were a hedge fund manager again, the sentiment indicators a bullish signal for equities. Best to close equity shorts that were initiated during the beginning of June last week, and wait until the market lures more small investors and fund managers backs into taking long positions.

Maybe short 10 year Japanese government bonds at 132 basis points is a nice way to be betting on rising Japanese consumer demand and a falling yen, although corporations there are likely to delever putting downward pressure on interest rates. The trade has a negative cost of carry, but it seems to be relatively low risk.

Prag, do you have any information about the number of fund managers or investors who are inflationist/deflationist?