THE RETURN OF FEAR….
Greed has quickly turned to fear as our manic friend, Mr. Market, resumes his generally bi-polar behavior. The note below is a fear barometer courtesy of CitiGroup (via Business Insider). It is consistent with levels also seen in the AAII readings of late:
“Panic” resurfaces. Admittedly, markets rarely get that “cataclysmic crescendo of capitulation” to call for buying stocks, but proprietary measures such as the Panic/Euphoria Model now are intimating that upside opportunity has re-emerged. Meetings with institutional investors do not anecdotally demonstrate that people are “freaked out,” but the sharp decline over the past six weeks has caused significant deterioration of sentiment (even amongst credit investors). Other metrics still are not providing the requisite buy inflection such that a more positive view for stocks is appropriate but that nuance does not imply a willingness to grow long bull horns yet.”
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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VIX Study:
Let’s play chess Jeff Saut and Morgan Stanley. Saut posted forward SPX returns and Morgan Stanley(who I worked for long ago) who can’t even price an IPO correctly are telling you to buy.
So…here we go.
VIX: When the VIX cross above 25 after below 25 more than 1 months recieved a new signal on 5/18. Since 1990 1 month out 11(up) 13(down) SPX is -.82%.
6 months -2.90% 1 year -4.18%.
Fear levels: Look at what investors are doing. The capitulation and move to cash has not occured. Those who know where to look know this to be fact.
Check..your move Saut and MS(better hurry before your stock goes single digits)
VII are you increasingly bearish?
Now I’m green on my oil/gas stocks and still holding my hedges. Green on NG position, and plain on IBEX position.
What I’m looking forward: hedging out financials of my IBEX position while I expect a further decline in the index (and will grow my position in that decline, as I’m playign a martingale there).
About SPX and other markets… I’m going to short again gold/silver and/or miners (in fact started today), I hope I’m not stopped out on this, and keeping hedges on gas/oil equities.
So overall I’m on the “safe side”, without any big directional exposure but increasingly cautious on the upside. I still think we can have that rally back to the 1370 area in the next month or so, but very cautious…
@ Leverage-
RE: Gold Miners- We went long last week. Took it up to 10%. We are 10% long GDX and another holding. With out giving away the farm – We are closing this out today for a gain of 3% in two days adding .36% to the portfolios. Every little bit counts.
WE really really like Gold Miners…thats all I can say. And we will come back when the time is right and go Long Long. Your smart I hope you can see some of the charts as to when to do it. JJ Abodeely piece on this site should be read by followed regarding the miners. We are selling now because we see the opportunity for better pricing. Although I may be splitting hairs. WE see this because of what were seeing from the SPX I can’t say much more on that.
YEP- like I said…I love your IBEX. Just love it. I just can’t get there yet with what were doing. But all I care about is Europe. When The 10% week happens I’m in.
Increasingly bearish? I just can’t dismiss out of hand what I’m seeing in the context of historical situations that occur when X and Y have shown up. Thus..I’m not mincing words…we are positioning and ready for the SPX to crash.
WE are today 30% Long and I’m closing out my Minors today of 10% which brings us to 20%. SO yes..I’m trying to hold what I have left but based on todays action we have 25% short loaded up and a sell ready for everything. I’m holding the line as best I can. Yes just a tick over 1360 is our target here…but I really struggle with this. The SPX needs to make investors think its leaving them behind. It’ acting like Andrew Bynum..just could car less about how bad it plays.
Yes I’m hesitant to short miners directly, right now I’m playing on the futures market as I’m more experienced there and can get out faster too (enough liquidity), in fact already in profit so (silver has dropped quite a bit from last post).
VII… I shorted Europe last week for an 7% gain in 5 days. Wish that trend had lasted longer, but France and Germany decided to announce that they are working on yet a new new patch to the Euro Block PIIGS (Greece specifically) problem and that headline story triggered a European and global rally this week, so I took my gains early.
I like gold, as well. And if Obummer wins it might be worth loading up on gold because he is going to drive the value of our currency into oblivion with his run away debt spending in a second term.
Gold’s looking like it may have a trend change here soon in Long’s favor again.
Sorry to get off topic. Don’t you guys think John Carney has been doing some good work spreading the MMR message?
http://www.cnbc.com/id/47510367
I talk to John quite a bit. It’s something everyone should know. An autonomous currency issuer can’t run out of money. That’s why Bass is wrong about Japan. They might suffer hyperinflation, but that’s a different phenomenon than default….
[i]“”Return of Fear …..”"[/i] ?? The $IRX doesn’t confirm.
The fear has not even come close to the levels we saw last August and again last Oct 3rd. The average small investor per AAII is still about 60% in equities, so even though they give bearish readings to the survey , they continue to hold on.
The best part of the fireworks show is the finale- Were just getting warmed up.