Tag Archives for " sentiment "

Newsflash: This Stock Market Is Not Loved

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Permabulls always say everyone’s bearish. And permabears always say everyone’s bullish. Neither side likes to provide evidence for their views. So I regularly run through a wide variety of sentiment measures to get a realistic reflection of the market’s mood. According to 7 sentiment measures I track, traders are slightly bearish, even though we’re within 1% of the all-time SPX high. Let’s go through them one by one: 1) SPX Options Prices – Bearish SPX options prices show a high put skew. I looked at 10% out-of-the money 6-month SPX options. There is currently a 10 point skew on the puts, which is the 98th percentile for the past 5 years. So relative to calls, traders are paying more for 10% OTM 6 month puts than they have 98% of the time over the past 5 years. 2) ISE Sentiment – Bearish The ISE Sentiment Index closed at just 63 yesterday (63 puts for every 100 calls). And its 10-day moving average is just 81.1 — a level that indicates bearishness. Markets tend to overheat with 10-day MA readings well over 100, so we’re not even close to that. 3) AAII Sentiment – Bearish The latest AAII Sentiment Survey shows that 24.8% of individual investors are bullish. This is well below the long-term average of 38.4%, and below the 2016 YTD average of 28.1%. Bearish sentiment is at 38.3%, the highest it’s been since the February 11 bottom, when it spiked to 48.7%. 4) Investors Intelligence – Neutral Yesterday, the Investors Intelligence Survey of newsletter writers showed the 4th straight decline in bullishness with a drop to 44.6% bullish from 49% last week. Bears are at a 10-week high at 24.3%. 5) CBOE Equity Put-Call – Neutral The CBOE Equity-Put Call ratio was 0.63 yesterday, which is above the YTD average of 0.5, and right in-line with the 5-year average of 0.65. This points to neutral sentiment. 6) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 61, which is modestly in the ‘Greed’ category. F&G operates on a 1-100 scale, and 50 is neutral) 7) Wall Street Strategists – Bullish The average year-end 2017 target price for the S&P 500 is 2391.44, according to Bloomberg. This implies a 9.7% gain from here — basically in-line with historic stock market averages. ********* So we have 3 bearish indicators, 2 neutral indicators, and 2 bullish indicators. Blend them together and you have a slightly bearish crowd. I’m hearing a lot of bears saying that everyone’s complacent… but I just don’t see it. P.S. Interested in prop trading? Sign up for today’s FREE webinar and find out if a prop career makes sense for you.

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The Morning Hammer: Ahead of the Fed, Markets Show Fear

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Global markets are rallying this morning as commodities rebound and the dollar retraces ahead of Wednesday’s big FOMC rate policy announcement. Traders are pricing in a mere 20% probability of a hike this Wednesday, so traders will mostly be looking for clues to see if the Fed moves in December. Europe is up nicely despite continued weakess in Deutsche Bank (DB) which is facing liquidity concerns due to the DoJ’s demand for a $14 billion payment to settle an MBS dispute. In Asia, the overnight interbank yuan rate skyrocketed amid speculation that China’s central bank is intervening to boost its currency. Traders are also shaking off terror concerns in New York City. Over the weekend, explosive devices were set off in New York City and Seaside Park, NJ. Another devices was found in Elizabeth, NY. Venezuelan President Maduro said OPEC members are close to reaching an agreement on stabilizing the market. However, such an announcement is likely not forthcoming at the September meeting next week. OPEC’s Secretary General said September is a “meeting of consultation and not of decision-making.” SPX futures are modestly positive this morning, much to the chagrin of the bears. Sentiment is leaning modestly bearish right now. As always, the bears say everyone’s bullish and the bulls say everyone’s bearish, but the numbers (which too many people ignore) are all over the place. The 10-day moving average of the ISE Sentiment Index is 91, which points to modest bearishness. The CBOE equity put-call is 0.65, which is about in-line with the 6-month average. The AAII sentiment survey shows that 27.9% of investors are bullish vs. a long-term average of 38.5%. The only data that really shows traders being complacent is the Investors Intelligence Survey, which shows that 49% of newsletter writers are bullish. So even though markets are just -2.5% off the highs, traders very quickly rushed to price in some downside. Volatility has returned to the market after 2 months of nothing, though we could end up in a holding pattern until Wednesday, which is not only has the Fed, but a Bank of Japan rate decision. There has already been chatter that the BoJ will go even further into negative rate territory. I’d love to get some excitement ahead of then, but I’m not counting on it.

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Wells Fargo May Be Buyable Soon… and 4 Other Thoughts on Today’s Market

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1) Wells Fargo’s Trip Wells Fargo (WFC) is coming under a ton of heat for its fake credit card account scandal, and it looks like it’s about to form a triple bottom with its February and June Brexit lows. I’m putting it on my long radar. I’m sure the company will pay a penalty, beef up employee oversight, and get a stern talking to from the powers that be. The optics are awful, but this scandal will eventually pass. If British Petroleum (BP) came back from its oil spill, Wells Fargo can recover from this. 2) Buy the Bad News? Today’s economic data was mostly lousy, yet the hawk trade — dollar up, banks up, gold down — is still going. So it looks like traders just weren’t surprised because the data has been so lousy lately. Fed funds futures barely budged. They’re pricing in a 50% chance of a December rate hike, essentially unchanged today. Or maybe folks just want to see CPI tomorrow before pressing dovish bets. 3) The Apple Market As I write this, the DJIA is up 58 points. Apple (AAPL) accounts for 23 of those points. I thought the stock was peaking near-term yesterday, but it’s above $115 for the first time since December 2014. 4) Donald’s Health Donald Trump released lab test results for the first time today, showing normal cholesterol, blood pressure, liver function, and thyroid function. Now I try to steer clear of politics, but people are increasingly focused on the health of the candidates. Anything that’s good for Donald tends to be good for biotech (IBB) — even though like Hillary, Donald has called for negotiating Medicare drug prices. 5) Sentiment Update AAII sentiment is 27.9% bullish, well below the 38.5% long-term average. The ISE Sentiment Index is at 76 this morning, indicating moderate bearishness. Yesterday’s Investors Intelligence survey showed that 49% of traders are bullish, slightly down but still fairly high. So sentiment remains very mixed. Traders are spooked a little, but not freaked out.

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The Morning Hammer: Panic Is NOT Here

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Throughout August, the market loved hawkish comments from Fed members. But by last Friday, traders had enough. The sold the market hard on Rosengren’s hawkish commentary. And of course on Monday, they bought the market hard on Brainard’s dovish vibes. Not that this is anything new, but the market truly is bizarro-land. Now, traders are pretty much taking a September rate hike off the table. Fed funds futures indicate a 22% implied probability of a September rate increase (down from 30%), while December is basically unchanged at 57%. Crude oil is down this morning after the IEA said oversupply will persist well into 2017. Remember that we have US crude inventory data coming from the API today after the close and from the EIA tomorrow morning. SPX futures are down -0.7% in the early going, which means volatility may really be back. Friday was the first 1% SPX down day since June 27, and Monday was the first 1% up day since July 8. And compared to the July-August snoozefest, a -0.7% move qualifies as real action! Bonds are firming up a little bit, with 10YR bund yields inching back down towards the zero mark. Treasuries are also up a tad. Gold is up as dovish vibes come back, though the volatile gold miners (GDX) are red pre-market. If gold stays strong in the early going, maybe those miners snap back up. Now the real fight begins. The bears failed at every turn for 2 months, but they’re starting to take the lead. And sentiment is still somewhat mixed, which for the bears is good because it implies the market is not braced for serious downside. The CBOE Equity put-call is 1.03, which is bearish but not extremely so. The 3-month VIX spread is +1.98, which is neutral. And the 10-day moving average of the ISE Sentiment Index is 87.4, which is modestly bearish. (87.4 calls for every 100 puts) So traders are spooked, but not freaked out. On a scale of 1-10, with 1 being max bearish and 10 being max bullish, I’d say we’re at a 3. Panic is not here… yet.

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The Morning Hammer: 5 Thoughts on Today’s Market Action

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Make sure you check out Doug Robertson’s options webinar, which is scheduled for Thursday after the close. Click here for more details. 1) Biotech Looks Great The SPX and NASDAQ are basically flat, but the Nasdaq Biotech ETF (IBB) is up 0.4%. That’s pretty impressive given that Biogen Idec (BIIB) is off -3.6% today as cold water was thrown on yesterday’s takeover rumors. BIIB is 7.8% of IBB, so biotech really is doing well on this shaky dayy. The S&P Biotech ETF (XBI), which is muct more diversified, giving a better view of biotech overall, is up 0.7%. 2) Crude Oil Too Strong? I’d rather see crude oil down into today’s inventory number at 10:30 a.m. ET. Oil has acted horribly and I’d rather just see an all-out collapse of expectations ahead of the data release. Economists are pricing in a -1.75 million barrely draw. We’re about to find out if that hurdle is low enough to clear. 3) Sentiment Weakening Just a Tiny Bit The VIX is flat today, but other indicators show that traders are getting a tiny bit spooked. The CBOE equity put-call ratio is still above the YTD average and the ISE Sentiment Index shows increased demand for put options. But one thing I don’t like is that the Investors Intelligence Survey has barely budged. 52.9% of newsletter writers are bullish, down just 1% from last week. That’s still within range of II’s danger zone. On balance, I’d say that traders are still pretty complacent — just not extremely so. 4) Tesla on Tap Tesla (TSLA) reports earnings today after the close, and a few options guys are chattering that Tesla options look cheap into earnings. Tesla options are pricing in a $12.84 move, which is actually small relative to some of its recent post-earnings report reactions. But I’m not so sure the options are cheap. Tesla has recently announced a boatload of news, including a capital raise, launch of Model 3 reservations, and the SolarCity (SCTY) deal. So Tesla may not have many big ‘shockers’ left to move the stock. And when you buy options into earnings, you want a big move in your direction. So tread carefully. (by the way, if you’re into options, make sure you sign up for Doug Robertson’s webinar) 5) Respect Price As of late, we’ve seen a lot of market commentators making “what goes up must come down”-type arguments against the market. Yes, we’ve come a long way since the Brexit bottom. But that’s been for good reason. Earnings season has not been as bad as expected, and economic data has generally been pretty decent. You must always remember the biggest lesson Mr. Market likes to teach — that price trends tend to last a lot longer and go further than may seem reasonable. So always respect price… even when it seems crazy. Remember, the most important question in markets is now who, what, why, or how. It’s WHEN. A great thesis means zero without equally great timing. So avoid a rush to judgement when it comes to price.

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