Sunday, July 26, 2009

The Sentimental Bloke

Australians aren't typically a sentimental mob...just occasionally the beer gets wet...
 The world 'as got me snouted jist a treat;    
 Crool Forchin's dirty left 'as smote me soul;  
 An' all them joys o' life I 'eld so sweet    
 Is up the pole. Fer, as the poit sez, me 'eart 'as got 
 The pip wiv yearnin' fer -- I dunno wot.

Still, it sometimes pays to know where sentiment is at.

My read of the current market is that the trend followers are still jumping on board, reinvigorating the current wave higher.

What we are looking for is a crescendo in market sentiment - where insiders and 'smart' investors sell into indiscriminate public buying. The logic is that since there are a smaller number of players in the know, their holding must be several times the magnitude of public demand. If they are selling, they need mass buying. Hence sentiment readings of 90% bullish. This is classic definition of distribution.

Sentiment indicators are few and far between in Australia. The US has a plethora of them, and some good blogs that keep track of these measures (such as likeTraders Narrative and The Technical Take in addition to those that comment a little less frequently such as TPC)

To run through a few of the better known indicators:

Investors Intelligence - read a quick description at Investopedia or at Investors Intelligence
American Association of Individual Investors Survey - overview at Sentiment Traderand AAII
CBOE Put/call ratio at CBOE
ISE sentiment - at Sentiment Trader and ISE
Rydex Nova/Ursa ratio -Investopedia andMarketHarmonics
Hulberts Newsletter Sentiment Index - CXO review found that there was no correlation b/w readings and market direction

In Australia - the cupboard is pretty bare. The ASX doesn't publish put/call statistics and we don't have a measure for fund activity or financial advisor sentiment. This is something I would like to address...but anyway here are what I could dig up:

ING Investor Dashboard survey - it's not a simple line chart but some useful info at ING
WBC Consumer Sentiment survey and NAB Business confidence - the guys at the Melbourne Institute don't want to make it easy for you nor do NAB. Thankfully, the RBA publisheshistorical data...
IFSA Coredata Investor Quarterly Investor Sentiment survey - its new and infrequent, have a look at it for March here and for June here

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