One of the refrains we have heard lately is that “Everyone is too bullish.”

Looking at the data, we find that the sentiment is decidely mixed — perhaps the best word is Neutral.

Consider the various data points:

•  Investor Intelligence Newsletter Survey has Bulls 40.4 v Bears 31.5 — this is the lowest level for the bears since June 2008.  (See chart below).  Overall, this is in neutral territory.  It is neither excessively bullish (see October 2007) or excessively Bearish (see October 2008).

•  The % of NYSE Stocks above their 200-Day Moving Averages was deeply oversold at just 1% in March — its now just under 40%.

Consumer Confidence has been extremely low, and is now moving off of those levels;

Earnings expectations have also been quite low — possibly too low. For the first time since the bear market began, earnings on the SPX are beating consensus;

Money Market Cash as a percentage of total Market Value peaked in March at ~44%; Its down to 38% as of the end of April, significantly above historic levels;

Cash in individual investor portfolios remains significantly above the 21.5 year mean of 25%; Its down from 44%, but remains elevated at 34%;

There are two pieces of anecdotal data worth sharing:

First, we have heard that Individual Investor trading volumes are much higher, while Institutional Traders are unchanged. This is consistent with the so called “Junk stocks” leading the rally off of the March lows.  A variety of single digit midgets (C, AIG, ABK, BAC, FNM, etc.) are all appreciably higher. That implies this is a speculative, flyer led rally.

Secondly, there is a WSJ article today: Brokers Abandon Wall Street:

“The number of brokers bolting from Wall Street is on the rise amid slumping markets and diminishing fees — a trend that could augur lasting changes in the way individuals invest.

In April, more than 2,800 people registered as brokers in the U.S. left the industry, according to the Financial Industry Regulatory Authority. The total number of departures so far this year stands at 11,600. In 2002, the previous high-water mark for industry exits in the 15 years of data available from Finra, a total of 11,500 brokers left Wall Street.

The bottom line: Sentiment data is off of the extreme levels we saw at the lows in March; however, it has not yet reached levels that are associated with excessive bullishness.

Fascinating stuff . . .



Category: Earnings, Markets, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

146 Responses to “Sentiment Reading: Neutral”

  1. HCF says:

    My question is, but how is the second derivative of the chart looking? That’s the most important data, or so the policymakers have been telling me lately!



  2. franklin411 says:

    Clearly, this is invented data put out by the Obama-Blankfein Conspiracy. Must be–doesn’t conform to my hyper bearish outlook.

  3. DL says:

    Options traders are pretty bullish, although that can turn on a dime.

  4. DL says:

    I don’t have access to a long term chart of Investor’s Intelligence data, but I would venture to guess that data for bull and bear markets is not directly comparable, i.e., that higher levels of bearishness are required to spark a rally in a bear market than is the case for a bull market.

    Of course, if the bear market is truly over (which I don’t believe), then this would be a good time to buy for people with a time horizon of 6 months or more.

  5. Bruce N Tennessee says: are reading the sediment…the new word is sentiment…

  6. centiare says:

    Why is so difficult to understand that even with unemployment at 15+% and GDP contracting in real terms by 10-15%, we could easily have home mortgages ‘back in the money’, the DJI at 16K+, GDP in nominal terms hitting $30T and the debt/GDP ratio back to 150%?

    Haven’t the analytical bears learned anything? You need to be long in the market not to make money per se, but to simply preserve your capital basis. The Chinese *are not going to be buying Treasuries**. How much clearer can the writing on the wall be? HeliBen clearly told everyone what he will do. Steve Keen says the Fed will need to print $25T to make a dent in the debt-deflation cycle. So, what of it?

    As long as the G20 central banks all practice coordinated QE, currency values will remain unchanged relative to each other. The only losers will be savers, yet it was clear from the get-go that they were the designated fall guys. What’s the difference between inflation & default? Nothing. Either way, they were going to be sacrificed.

    This site is supposed to focus on the big picture. Well, get a clue – you were sold “change you could believe in” because that’s what you were willing to buy. (Market research is rarely wrong.) The really big picture is that regardless of who happens to be the nominal lead, there isn’t going to be any fundamental change. Rather, we’re just at the beginning stages of radical & massive market manipulations to get nominal financials back in sync.

  7. Hondo says:

    Rally has no institutional legs

  8. Mike M says:

    Fascinating, indeed. Thank you. My own opinion (or hope I guess) is that we have a breather before moving higher. It would be nice to base a little bit.

  9. leftback says:

    Not really sure how to interpret sentiment readings in a propped-up market. Have people forgotten the bailouts?
    W may have left the White House but we are undoubtedly in a W-shaped recession.

    I have moved my sights from the 875-900 area to the 940-960 area which is around the 200DMA. I’ll keep half an eye on the market here but I don’t see any reason why the rally could not test that level, so I’ll play small for now.

  10. pmorrisonfl says:

    centaire writes:
    > HeliBen clearly told everyone what he will do.
    > Steve Keen says the Fed will need to print $25T to make a dent in the debt-deflation cycle.

    Points taken. But where does the money go? The Fed can print and ship its truckloads (of bits) to the banks… do the banks then buy out the mortages we the people aren’t paying? What happens after that? And how will J6P’s like me get the income for one of these reflated mortgages? Working in the GS coffee shop?

    Never mind what China would think of $25T of new dollars.

  11. HCF says:

    The question we need to ask is “Is investor sentiment a leading or lagging indicator?”

    From what I understand, the causality is good stock market performance leads to improving investor sentiment. If that is indeed the case, then sentiment has zero PREDICTIVE ability. My guess is that if the stock market goes up further, sentiment reading will go higher. If the market tanks, then sentiment will too…


  12. HCF says:

    >W may have left the White House but we are undoubtedly in a W-shaped recession.

    In honor of our 44th President, might I propose that we’ll have an “O” shaped recession…

    As in, we just roll out the same policies over and over and over again, end up in the same place, and wonder how the hell we got there?


  13. Tom K says:

    I agree, from a big picture perspective, looking at longer term cycles, sentiment is neutral. However, from an intermediate term perspective, sentiment is demonstrating some degree of frothiness. In my studies I’ve found intermediate term sentiment to be far more reliable than long term sentiment.

    Lastly, even if sentiment is signaling some frothiness, it doesn’t mean a reveral is imminent. Market can and often due continue to climb in face of excessive optimism. The key is to watch for sentiment reversals in zones of excessive frothiness.

  14. rob says:

    Here’s my beef and why I distrust this “rally”… HTF can something rebound nearly 100% on one half the volume! Because it is gamed! The below chart of RF is a few minutes old

  15. rob says:

    Ok… can’t embed charts on here.

  16. CNBC Sucks says:

    What centiare is trying to say is that all of you reading this blog are too smart for your own good. You should wish you were dumber, maybe a lot dumber. Guys like Mannwich, leftback, and Mark E. Hoffer think they will achieve superior returns because they are so smart, but they won’t because the asset markets are so dumb. You people have to factor stupidity – and I mean a LOT of stupidity – for your trading models and strategies to work.

    The people on this blog are just too smart to understand stupid people. Figure it out: you are outnumbered 10:1, maybe 100:1 or even 1000:1 by stupid people!

    My last comment ( was supposed to be The Swan Song of The Great CNBC Sucks. But I have only gotten responses from ahab, wunsy, and vv111y, whoever that is. Therefore, I have found my new and final annoying schtick (along with my “Barry the Commie”, “Republican Ritholtz” and “registered Republican” schticks) that I will overuse on my ride-off to the TBP sunset:

    You are just too smart for your own good!

  17. Ned Bushong says:

    My proprietary indicators are quite frothy. It can get worse but it’s dangerous, IMO.

  18. dead hobo says:


    I hope you’re right. While I’m not a believer in technical analysis, a lot of others are and their behavior adjusts to the inherent preconceptions. A fall now or at some other level predicted by TA would say a lot about either the honesty of the rally or the bubble management philosophy of the protagonists.

    My sentiment would improve greatly if market looked a little less like mid 2007 oil at the start of the rally.

  19. dead hobo says:

    Be stupid, get rich …CNBC Sucks.
    Good idea. You first.

    I meant mid 2008 oil at the start of the rally.
    I really need to start proofreading someday.

  20. Kid Lane says:

    Longtime listener, first time caller

    Thanks for all the hard work you do . I am going to take some of the money I avoided losing because of this site and splurge — see you at the conference.

  21. rob says:

    There will always be more stupid people than smart people… they procreate too fast!

  22. Bruce N Tennessee says:


    You have for the most part been a good sport…I will just briefly review some of the reasons that many here are still skeptical…

    First, when you see the green shoots, what has changed since 2007? Where will the new stimulus come from other than the government? To reiterate, the housing ATM is gone for now, even if some are being to buy houses, the withdrawal of value from those houses is at a standstill. People are now saving at a 4.2% rate, and this is increasing. Most stock portfolios are down at least 1/3 from 2007, and this doesn’t create a feeling of wealth. The unemployment rate will be 9% or maybe over this week, and it will take some time before this begins to go down. States, cities, counties are increasing taxes and it is the wrong time to do so. Some of our largest employers will be manufacturing with fewer workers..especially housing and automobiles. This will go on for years. Commercial real estate is tanking, as are retailers. Is the rate of decline slowing? Probably. Couldn’t go straight down forever. But as many have said, slower declines aren’t increases….

    And what about the future? Whether you think it was needed or not, this amount of government spending will have to be paid for in taxes (national) or we default. The Chinese and others have developed concerns about our debt and for the last few months our interest rates have been rising, in direct opposition to the statements of Ben Bernanke. We are left to puzzle out why.

    We are left to get over the credit bubble. The government actions may change how we do that, but we still must find a new paradigm with a lower amount of credit being used on a daily basis for some time…

    Realism vs pessimism…or as the song goes..”There’s a thin line between love and hate…” if you want to think of it that way.

  23. CNBC S,


    I’ve just been keeping it simple, fading Puts and Calls off the ~17 #, and Long some of the underlying..

    for the most part..Calls, in general, have fattened up quite a bit, recently, been fading some of those too..

    see if you like this:

  24. Rick R says:

    I would guess that a lot of this movement is indeed institutions putting money work. Most of the buyside managers got clobbered last year, and are probably trailing the averages again in 2009. They are going for broke here, hoping that the money they manage doesn’t find another home elsewhere. So why not load the boat on the “cheapest” big stocks(i.e., absolute dollar price) C, BA, GE, ABK etc. and hope for the best?

    There’s too much momentum right now. It will take at least a few weeks to a couple of months for a meaningful, sustained drop to occur.

  25. ben22 says:


    I think this is well done. I’ve been making a lot of these same points on here lately. What about the Yale Crash Survey, that’s another one I mentioned recently which is still showing up bearish. I agree, the sentiment can give the rally legs, it’s not too bullish yet, some bigger money will still come in the longer this goes and clearly, as you say above, retail is bigger in this one.

    There are a lot franklins reading this as the all clear in johnny retail land.

    My target remains 965-1k on the S&P, with short term pullbacks on the way up. I would expect to see the bullish sentiment indicators at those levels to rival the levels we saw in October 2007. That would be more signal of a top and an ideal condition for the bear to show up again.

  26. ben22 says:


    That was a good effort at explaining but you are wasting your time with him IMO. Someone that immediately spends money based on a tax change on a new phone, which will be outdated in a few months, has no idea what a credit bubble means, no matter how many ways you try to explain it.

  27. scarlo says:

    It’s difficult navigating all the information and putting together a unified theory that may be used as a looking glass to predict the markets. In a nutshell however, my sentiment is that the market was grossly oversold and this recently rallying was simply a snap back to reality. So when folks say that we are going down again, and lower than before, I say “good, bring me back more stocks on the cheap – I’ll be more than happy to build my portfolio with them”.

    That being said, it’s hard to decide if there’s much room for continued improvement in equities market pricing without some better economic news. I thoroughly believe that the eye of the hurricane is past (since the gov’t has pledged everything including the kitchen sink to support the markets). There will be some nasty effects from commercial real estate, continued deleveraging, weakening dollar still to come – but all told we were looking at a complete meltdown where consumers disappeared for good (which is where the markets were leading with their pricing). With a weakening dollar enforced to relieve our collective debt burden, equities look increasingly attractive compared to the mattress. I’m looking outwards with a propensity to pick up international safety consumer-driven stocks with strong balance sheets priced at “juicy”. I’m nipping at the edges on emerging markets, but only carefully. Silver was hot a week or so ago, but it’s getting pricey now. For those who think the Dollar will continue to strengthen – I just don’t see it.

  28. Thatguy says:

    Quote from Centiare:
    The Chinese *are not going to be buying Treasuries**.

    I’m not so sure about this. I was thinking about this from the Chinese viewpoint the other day. Aren’t they just as desperate as TPTB are to get things back to “normal”? They are sitting there with massive manufacturing capacity with minimal domestic demand. Also, their sheeple are not nearly as fat and happy as us over here and therefore are far more likely to threaten the state if they lose their jobs and are forced to join the family back on the farm. In my mind, this means that they will be doing all they can to reenergize their largest export market. Seems to me that they either support treasuries (by buying or at least not dumping) or they risk massive internal strife. I’ve long thought that the Chinese would call Ben’s bluff, but from another perspective they may be just as anxious to help perpetuate the charade. After all, I’ve seen nothing from them other than jawboning.

  29. The Curmudgeon says:

    “…there’s a thin line between Saturday night and Sunday morning…” (by the other “Buffett”, i.e., Jimmy)

    Hope and Fear are two sides of the same coin…and since we have now completely become herd animals, unwilling to think for ourselves, and able, at the speed of light, to sense what the others to whom we have off-shored our thinking are doing, we know immediately when the mood of the herd changes, and even if every sinew we possess says fear, we still, turn on a dime, to hope.

    Hope turns to fear just as fast. Neither view is adequate, and they tend to cancel each other out in the long run. Which, I think, is what this chart is saying.

  30. franklin411 says:

    Correct me if I’m wrong, but I fundamentally disagree with the implication that a “real” recovery has to come from the private sector. We saw in World War II that government spending can indeed produce a recovery and enduring prosperity. It’s all about the question of “spending for what?” Spending on flat screen TVs and iPods is necessary for short term stimulus, but long term we need to invest in education, infrastructure, renewable energy, and science. I fully support massive, unprecedented borrowing on programs that will grow our GDP by giving us a comparative advantage in the global marketplace over the next 30 years. We can’t compete as a supplier of raw materials (that’s an ephemeral prosperity). We can’t compete as a supplier of cheap labor (not when there’s Chinese slave labor in the world). All we can compete on is having the world’s best educated, most productive, creative and innovative workforce in the world.

    I don’t see private enterprise *ever* investing in the long term prosperity outlined above. Business simply cannot do the job, because it has enough on its plate with the day to day matters of commerce. Only the government, which is nothing more than citizens collaborating as a society to achieve common goals, has the ability to pursue long term national investment.

  31. ben22 says:


    You just proved this post right? Bring on lower stock prices so you can build a portfolio with them! Thanks for that. Not trying to tell you what to do but I’d advise some stops if that is your strategy.

    Just my own prediction but the desire to hold cash will be unbelievably high before this is over. It got very high in March, right at the 666 bottom, but it will go higher still. Use the Investor Allocation survey to see what I mean. Desire for stock ownership never recovered from the bull market of the 90′s, not even during 03-07.

    See lefty’s comments on “breaking-even” that’s a capital gain for some people after the last 18 months.

    Silver is in a downtrend but I think your call on the dollar will prove wrong, it will remain strong, I recently flipped my stance on this. Time will tell which one of us will be correct.


    I think you are on the right track, I don’t know that China will buy as many as they did in the past, but to think they won’t buy at all is probably not true. Chinese citizens have a very high savings rate, even if it comes down, they can’t buy iphones like it is done here in the states. They want things back to “normal” as you say. See the comments today from the PBOC.

  32. CNBC Sucks says:

    @hobo: I don’t have to go first. Wall Street already did, and the UST will print trillions just to make them whole! When everyone else is stupid, and as long as the government can money-print stupid people out of trouble, it doesn’t pay to be smart.

    @Hoffer: Even though we have somewhat different political ideologies, I have always liked your content. However, I see that your biggest problem is you think there is a rational explanation for everything. You went on about The Obama Deception for a week or so. Didn’t you ever consider that Obama is just making some really STUPID mistakes?

    I surrender to CNBC. White flag! Those guys are dumb as rocks, but they have money printing machines on their side.

  33. DL says:

    dead hobo @ 1:50

    I think that you mischaracterize technical analysis. The primary goal is not to determine the level for which, at some point in the future, a reversal will occur. That is at most a secondary or tertiary goal. IMO, the primary goals are to (a) create a set of criteria for determining what the trend is, and when it has changed, and (b) create a set of rules for entering and exiting positions based on what the trend is determined to be.
    (The foregoing, however, does not take into consideration Elliot Wave theory).

  34. insaneclownposse says:

    action seems pretty bullish to me. Market refuses to fall apart – except for one day a couple of weeks ago….. and that’s characteristic of a bull market in my limited (decade) experience.
    I bought a ton of GSG, own some financials and set stops far below where things are currently trading. I’m checking out for a few months.
    A bear market is far too much work. Bull is really where I want the market to be.
    Good luck to all.

  35. CNBC S,

    36, 37, 38, 39, 40, 41, 42, 43, 44

    a lot of these things, if one were to ascribe it to “Stupidity”/”Incompetence”, would have been accomplished by Individuals that, otherwise, would need assistance crossing the Street.

    or, “credulity” can only get one so far..

    past that:
    review of “Softs”

  36. the article here: Sentiment Reading: Neutral

  37. ben22 says:

    @ hobo,

    Re your 1:50 comment and the one on “magic charts” yesterday. I said this in another thread:

    @ dead hobo,

    If I were you I’d let it go when it comes to bashing TA or charts. Clearly it bothers the hell out of you and I understand why, but I’m not so quick to dismiss it as you seem to be.

    TA always gains in popularity as bear markets go on, when fundamentals fall flat on their face as they have over the last several years.

    I think you are older so you should know, in 1982 after 16 years of sideways markets most of the people being interviewed on the Financial News Network were technicians, by the late 90’s after so many years of great markets the majority of commentors on CNBC are economists and money managers, which is still true right now. These are the same people that get killed on this board daily b/c they told you to buy all the way down.

    In Nov 1998 there was a WSJ article “Timing is NOTHING”

    The timing of that article was interesting, that’s something.

    These are social trends I’d try to get used to. TA is making a return.

  38. I-Man says:

    My sentiment is its going to be one hell of a hangover after this party’s run its course.

  39. Transor Z says:

    @ CNBC Sucks: Dude, you have more Farewell Tours than David Bowie. :)

  40. hopeImwrong says:

    Buyer STILL in control. Unbelievable. Risk is high for shorts (and probably for longs too, but less so). Tight stops required for any short to medium term positions for the foreseeable future. Any correction could snap back into rally mode quickly. Any rally could die quickly.

    Long term positions are at your own risk (bet your philosophy, or analysis, or whatever). It’s your money. But for my money, small positions are the only justifiable long positions unless completely hedged.

    Full disclosure (90% cash, rest is in xme, mo, rai, gld, slv, gdx).

  41. scarlo says:

    ben22 – when I trade, I always have in my stops. However, on my value-based longs I’ll take my chances with yields that are kicking off better than treasuries from companies that exibit safety characteristics, have lovely balance sheets and sport very modest payout ratios.

    Granted, I’m greener around the markets than most in here probably, but it seems that the amount of stimulus being used when compared to the decline in GDP is a ridiculous amount, when looked at historically (see recent Grant’s I.R.O.). It’s hard to maintain a perma-bear attitude about the stock market in light of this. I’m by no means hawking some big bull attitude, but I like the current valuations on a lot of selected equities to start building positions in – that’s all.


  42. dead hobo says:

    1) I’m getting sick of this fixed fucking market. Any market that goes up parabolically with no hint of stopping is crooked. I wonder if this is the “hope you can believe in” we voted for. GS apparently owns the SEC as they write rules that favor them.

    2) ben22, TA has always been around. I’ve written about where it is useful and when it is astrological. Basically, anyone who looks at a past chart and decides a pattern from today looks like it, thus today will be like then is full of crap. The charts I was referring to were supposed to be Magic Charts from decades past.

    A graph that takes recent BEHAVIOR and turns it into a depiction with an understanding of the psychology behind it has an edge that may or may not pan out.

    The chart guidepostings was referring to was a toppy looking history chart. He was assuming that toppiness from the past meant there was a good chance we would have similar toppiness today. It was basically a magic chart. However, a lot of TA people share a common belief in this type of magic chart and this sometimes causes markets to acts like the chart controlled the action. I doubt that will happen today as this market is fixed.

  43. ben22 says:


    I sold some of the MON I bought @ 71 for $91 today. House money left in there at this point, I had to take that gain, as much as I heart MON.

  44. Transor Z says:

    Somebody here was talking not long ago about shit construction in recently built homes:

  45. leftback says:

    The XLF has just reached its New Year 2009 level. Someone is breaking even today.

  46. CNBC Sucks says:

    @Hoffer: Your series going back to 36 makes sense. Maybe it’s just me who tries not to believe.

    @Transor: Bowie yes, but not as many as Favre will have. I would love to quit TBP, but where else am I gonna ramble on about all the money printing? Have you ever seen the look on people’s faces – even in intellectual circles – when you bring up money printing and “monetizing the US national debt” in actual conversation?

  47. ben22 says:


    I gotcha, nothing personal, I enjoy your comments on here. I’m curious, what do you think of elliot wave? It’s a little hard to argue with Prechter’s long term track record and he’s a chart guy if there ever was one.

  48. dead hobo says:

    My sentiment? I’d love to put some cash in the market. Just not this market. I stand to lose a big chunk when the rug is eventually pulled out from under. I don’t feel like waiting out until the next natural or fixed run up takes place to break even. Just like oil went ballistic, the stock market is doing that now. And the pointy headed economists and regulators who can’t see bubbles in formation or recognize them when they exist will be stunned and shocked about the one forming now. Fucking morons. Nor will they admit to the conditions (SLP) that allowed it to form. Fucking morons.

  49. leftback says:

    Thanks for letting us know how you feel, hobo. Don’t hold back, dude.

  50. dead hobo says:


    Elliot waves short term in an honest and active market have psychological relevance. Long term, they are just jagged lines that people form into patterns using their imagination. In this market, they are probably a deliberate concoction and potentially something the players bet on to see if they can get one to form.

  51. CNBC S,

    re: Money Printing, yes, they blanche/become uncomfortable, and start eyeing the large part.



    why not sell the May 80 call, and buy the 80 put?

    you would have increased your net sales prices w/ no additional risk..also, it’s an example of what I was referring to w/ “Calls are starting to fatten up”..pricey, pricey Calls, gotta fade’m..

  52. Transor Z says:

    @CNBC: The intellectual crowd I roll with these days is more concerned with why Dumbo’s Mommy got put in jail or what Cruella De Ville is going to do with the dalmations. That’s when I channel Ben Bernanke (or maybe Ben channels me?) and try to redirect their attention to something happy.

  53. I-Man says:

    Oh hobo… I feel your pain amigo. But your rant strikes me as a great contrarian indicator, FWIW.

    It sounds capitulatory.

  54. call me ahab says:

    dead hobo-

    I’m with you- can’t go long- there can’t be 2 month run up without some give and take along the way- just appears forced and “not real”.

  55. ben22 says:

    @ hobo,

    One more then, and this is not sarcastic:

    What exactly does an honest market look like?

    There always is some manipulation right?

    @ mark,

    now that I look at what you are saying on MON that certainly would have made more sense.

  56. HCF says:

    > there can’t be 2 month run up without some give and take along the way- just appears forced and “not real”

    No rally or fall goes in a straight line…… unless it’s rigged by the government of course!


  57. Clem Stone says:

    I might have the numbers wrongs but i think this could be the first time in recorded history that the market is actually above Abby Joseph Cohen’s fair value level (SPX 900 last i heard).

  58. ben22 says:


    What I was getting at with my question is that prechter has made amazing calls since the 70′s and it’s the longer term trend calls that he’s made that I find most impressive. So I was just curious about your response that you think it works in an honest market, he seems to just deal with whats in front, honest or not.

  59. leftback says:

    I-Man: Yes, I have seen signs of bear capitulation today and yesterday. e.g. discussion of whether FAZ would go to zero. We saw the same for UYG and FAS in March, of course. Some signs of a bottom in SRS today.

    So… there be falling knives. One is reminded to pick them up by the handle, not the blade. (Thanks, Andy T.)

  60. ben22 says:

    It’d be nice if JG came out with some commentary over @ GMO.

    He had an overshoot down at 450 and fair value at ~900 if I remember right. Would like to be a fly on the wall in that office.

  61. leftback says:

    JNK also at 2009 break-even level. Fascinating psychological balance here.

  62. hopeImwrong says:

    @Dead Hobo – This rally isn’t parabolic. It seemed more logrithmic until the break above 870 on the S&P.

  63. I-Man says:

    Oh man… my buzz is wearing off… just one more shot, one more line… let’s keep this party going!!!

  64. hopeImwrong says:

    On topic – to me, sentiment on this blog indicates the rally could go higher. Logic indicates the rally could reverse on a dime.

    fas and faz will both go to zero. So bulls and bears will both be right there.

  65. ben22,

    just don’t dive in w/o your swim trunks on, there’s lots of good intro to options info available
    for starters.

    and OptionNewsNetwork is pretty good, too

    as well, there are some weblogs that are Really good..

  66. I-Man says:

    come on daddy goldman… gimme some more, gimme some more…

  67. Transor Z says:

    @ben22: Sorry to jump in, but I like your question to hobo.

    Goes to the “orderly markets” theme I mentioned on the earlier thread. Thus the inherent transparency problem. If you accuse the NYSE of knowingly tampering with the market to the advantage of some at the expense of others — without properly disclosing their actions — you have to prove it.

    Prove that steroid use impacted baseball game outcomes. We all *know* that it did, but how to prove it statistically? What does a “clean” baseball season look like in the age of high-tech sports medicine?

    Seems to me that’s the challenge right now.

  68. dead hobo says:

    ben22 Says:
    May 6th, 2009 at 3:11 pm

    @ hobo,

    What exactly does an honest market look like?

    An honest market is an active one with buyers and sellers, none of whom individually can control much of anything. There will always be irrational ups and downs in an honest market, but it will always respond to the economy in an explainable way.

    The Y2K bubble was an honest market because the crooked accounting of the day plus the ignorance of the average investor, as compared to today, made the run up look plausible. The economy was booming, more or less, so it looked natural for the market to also boom. By that definition, even the oil bubble was somewhat honest because people had more than enough evidence to decide if oil was really worth $147. In this case, oil thieves exploited the stupid.

    In other words, everything fits together in a package that makes sense. Even if the package holds a gold brick or a turd, the fact it is a closed box and everyone agrees on something special inside of it and all evidence points to something special inside, makes it honest. Once the box is opened, if the box holds a turd and the market still rises, then there is something smelly in both places.

    Today, I believe the market is intentionally being propped by the SLP program as a well meaning gesture to restore people’s savings. Since the rise is not based on reality and it affects honest but gullible people, I think it is shameful. I think the Obama Put goal is to prop it up until it can stand on it’s own. This assumes a healthy economy, which is a big assumption. Since there is spill over to the oil markets today, the rise there offsets any fake gains in equity prices.

  69. hopeImwrong says:

    BTW – although may traditional TA indicators used by traders may not work well for leveraged ETFs (trade off the underlying index TA), the leverage short fund medium term charts are ridiculously bearish, and I think that is a valid indicator of the strength of this move. Going against this move is STILL high risk.

  70. DL says:

    hopeImwrong @ 3:29

    “Going against this move is STILL high risk”.

    I don’t see a lot of people here arguing for a large short position.

    (I’ve given up on trying to figure out where the top in this rally might be).

  71. ben22 says:


    I suppose that’s as good as you could have answered my question. I was sort of hoping you’d give older examples than Y2k or oil though. I’m a young one so I was looking for further back, references to the 60′s, 70′s maybe. Good enough though, you don’t owe me anything. I understand what you are trying to say, just not my same p.o.v.

    I actually made the comment on here the other day that a good sign for a top would be when the govt says they don’t need to do anything else, which is sort of along the lines of what you are saying about propping prices up, just because the market is up doesn’t mean we are fixed.

    I think most of us here believe that they government hasn’t done nearly enough if we are going to in fact “inflate” our way out of this.

  72. HCF says:

    One fascinating fact has been the leadership of the recent rally…

    It has been low-quality, beat up names such as financials and real estate, and leaders in the previous bull market (RIMM, AAPL, etc.). How often does a new, multi-year, secular bull market begin with retreads leading the way?

    The only other stuff I’ve seen that has done well (thankfully for my otherwise mostly short portfolio) has been very defensive, food related names (AIPC and GMCR), which make generic brand pasta and K-cups for home brewing, respectively. Do those really seem like the types of leaders for prosperous times?


  73. ben22 says:


    I’ve done very little with options over the years. As you’ve said many times people would do well to use them more to lower risk, myself included.

  74. SavetheWhales says:

    Who knows what the limits really are?

    With QE, the Fed can support the market in the air for a long, long, long time.

    In effect, the market becomes a transmission mechanism for moving taxpayer wealth through the Fed and onto the balance sheet of speculators.

    The bet really isn’t with the market, the bet is with Bernanke and Summers.

  75. hipster says:

    word is Meredith whitney reiterating her sell signal on the financials…..

    let me ask a question….if this was investors believing in the recovery, wouldnt we close at highs of the day indicating the buying is not for flipping? Feels like traders getting jiggy on the upside….

  76. Transor Z says:

    @dead hobo:

    Maybe the SLP is “well intentioned” if you’re inclined to be generous. But maybe it’s more like quick, quick, let’s pour water in the booze bottles so mom and dad don’t know we partied all weekend.

  77. Mannwich says:

    We’re all day traders now. Bottom line. Who in their right mind would trust this market to keep anything it long term? The damage they’ve done and continue to do will reverberate for years, if not decades.

  78. I-Man says:

    @ SavetheWhales:

    Respectfully, I dont think the Fed has time to give a shit about the equity market… they have their hands more than full with the bond market… and that big thing we call the currency market… thats what will end up wrecking the show. Cant manipulate that one. Not for long anyway.

  79. DL says:

    ben22 @3:40

    My view is that the rally may have a bit more to go, but at the same time, that it could then drop 15-20% in just a few days. Under that scenario, it could make sense to own some index call options (which I do).

  80. ben22 says:


    That is a symptom of the bear market since 2000. Fewer and fewer people will do buy and hold as this goes along, just like more and more people will look for technicians instead of fundamental managers. For now though, lots of folks still think that it’s insane to trade and Vanguard still rules the world according to that crowd.

  81. DL says:

    SavetheWhales @ 3:40

    “With QE, the Fed can support the market in the air for a long, long, long time”.

    If crude oil takes off, the jig is up, as far as QE is concerned.

  82. Mannwich says:

    Good to see the switch to the daily final 10 minute pump is still turned to “ON”.

  83. SavetheWhales says:


    Agreed – I doubt the Fed attempts to manipulate the equity markets directly.

    But indirectly, their QE policy has reduced costs for homebuyers and increased value for MBS holders. In effect, QE is repairing balance sheets and hopefully increasing earnings across the equity spectrum.

    Whether the equity market is over reacting or not, we’ll know in hindsight. But it is abundantly clear that many of the rising phoenixes of the past two months would have instead died a quick death had it not been for the Fed and Treasury running the printing presses and opening their wallets.

  84. leftback says:

    Meredith Whitney…. or Larry Kudlow?
    Gee… I wonder who’s most likely to be telling the truth?

  85. ben22 says:


    Good strategy. I’ve moved from Net long several days ago to neutral now adding to some real short term bonds and a little bit of TIPS. Since my target is 965-1000 I will probably get short and sell more as we get closer. I don’t have a single short right now. I’ll do my best to read into any short term movements but I think the general direction is up to that range, then my guess is one monster move down after that.

  86. dead hobo says:

    Mannwich Says:
    May 6th, 2009 at 3:51 pm

    Good to see the switch to the daily final 10 minute pump is still turned to “ON”.

    Mr Psychic! How did you know?

  87. ben22 says:

    Wow, how about that close.

    All I can do is sit at my desk and smile, Citi was up 16% on the day. Lol.

  88. Bruce N Tennessee says:


    Couple of points..

    We don’t have the best educated workforce in the world…Korea, Scandinavia, much of Europe has better math and science scores by any type of scoring you’d wish to use…

    “Massive …borrowing” won’t give us a competitive know that. I suppose what you are saying is that it is worth it to create this degree of debt, but I stongly doubt that that debt will somehow be transferred to a competitive advantage…How do you get competive advantage?

    Well, Toyota sold cars for years here and didn’t make money…finally they did, but they were extremely patient.’

    The Chinese did it differently, by concentrating on labor costs and industries that used labor (shirts, etc.) and by keeping the value of their currency low. Those jobs are history, no matter what Obama does. Do you think North Carolina will ever produce t-shirts again. No.

    The Europeans subsidized Airbus until they could compete with Boeing. And so on.

    By the way…other countries have tried to make everything work by simply depending on the government…you could speak with Mr. Gorbachev to see how that finally worked out…I know you must not mean that massive government stimulus will produce a sustained economy…I know you don’t mean that..

  89. Mannwich says:

    @dh: Because it’s happened almost EVERY single day now for 9 or so straight weeks. Coincidence? I know, I know, take my tin foil hat off but does this phenomenon not seem a little weird or unnatural to anyone else?

  90. leftback says:

    LB acquired some FAZ and SRS at 3.59:57. This is a trade, only 0.5 KSU (kitchen sink units).
    Not calling a top here, inclined to agree with ben22 except my target is 950.

  91. Mannwich says:

    Why do I get the feeling that at least some bulls who are entering now were the ones buying multiple homes from ’05-’07 thinking it was a “can’t miss” investment, since “real estate prices never go down”? This market is a joke. The Potemkin Market. Our crappiest, worst run, most insolvent companies do the best and some of us think this is recipe for an ecnomic turnaround/rebirth?

  92. dead hobo says:

    Mannwich Says:
    May 6th, 2009 at 4:02 pm

    @dh: Because it’s happened almost EVERY single day now for 9 or so straight weeks. Coincidence? I know, I know, take my tin foil hat off but does this phenomenon not seem a little weird or unnatural to anyone else?

    No, not weird. I’m just marveling at the randomness of nature.

    Seriously, assume 9 weeks for sure. It has a 50 50 chance of ending high or low on any day. Given my recollection, out of 45 days (9 x 5) there should be 22 or 23 up and down ends. There have been maybe 5 down. I’m too lazy to be more precise. So the probability of it being so skewed to one side is about .00001.

    Nothing to see here. Just keep moving.

  93. Mannwich says:

    Not many care about reality anymore, but here’s another dose…… note the income tax refunds item that I hypothesized a while back could provide a temporary jolt (I know because we got a sizable refund this year) for a while, however short lived it might be.

    And what irritates me the most is I’d be happy to embrace a turnaround if I saw one developing, but it’s clear to me that it’s all smoke & mirrors. The sheer fraudulence of all of this denial is just astonishing at this point.

  94. danm says:

    Everyone keeps on talking about the high cash levels but no one seems to mention the low percentage in fixed income over 5 years.

    Maybe most of this cash historically would have been in long bonds and not necessarily in equities!

  95. Mannwich says:

    @dead hobo: I’m not commenting on whether the market ended up or down on any particular day but there has almost always been a flurry of buying in the last 10 minutes of every trading day in the past 8-9 weeks or so.

  96. AmenRa says:

    Fundamental analysis is good for the long term investor. For the short to intermediate term investor some form of TA needs to be a part of their analysis. TA is just for analysis. It’s not a divining rod. Using a combination of Western TA with Japanese candlesticks gets you good in/out points and helps with setting stops. It doesn’t give a damn about the economy, who got fired, who is going to jail, etc. It lets the price action determine what would be the prudent move in the near term for your investing.

    It would be great if it was a divining rod :)

  97. leftback says:

    @Manny: The closing rally is short covering by day traders. That’s why it happens every day. It’s also why I trade so late. Here at Schadenfreude Asset Management we like to make money, and we also like to save money.

    I think there must be some tools in the market now on the long side. Tomorrow (or next week, or next month) could be a rude awakening for newbie longs: this is without a doubt a Pump n Dump for the ages.

  98. Onlooker from Troy says:

    ben22 Says:
    May 6th, 2009 at 3:16 pm

    It’d be nice if JG came out with some commentary over @ GMO.

    He had an overshoot down at 450 and fair value at ~900 if I remember right. Would like to be a fly on the wall in that office.<<<<<<<<<<<<<<<<<<<<<

    Ask and you shall receive! :)

    An interesting read. Balanced and analytical as usual.

  99. hopeImwrong says:

    LB – do you have a stop order or a mental stop? Do you trade in the pre-market?

    I feel as many do that the market should and will go down, but I don’t have the risk tolerance for establishing an overnight position in this tape. I have a feeling the most ripe time for potential manipulation is the pre-market (did you see what happened this morning?). Therefore, I won’t hold overnight to catch a turn, even though I expect a turn. And I won’t hold a losing position while I wait for reality to hit the market (especially in the leveraged ETFs). But I will trade them. I actually made money in srs today.

    Good luck, and I mean that sincerely.