TIM Report: Sentiment Crosses into Bullish Territory

According to the recent TIM (Trade Ideas Monitor) report, the TIM Sentiment Index (TSI) increased 2.1% week over week to 50.90 on August 6th, compared to 49.84 on July 30th (see last post, and previous post and the youDevise website for additional information on the TIM report). For the last few weeks, the index has been fluctuating just above and below the critical 50 mark, differentiating bullishness from bearishness.

The TIM report lists the daily change in the TSI as being statistically correlated to market movement 1-3 days forward. Total new short ideas as a percentage of all new ideas sent to investment managers by way of the TIM increased slightly to 33.21% on August 6th from 33.19% on July 30th. Shorts represent 34.96% of broker ideas in August, compared to 40.69% year to date.

As for individual securities in the U.S. and North America, Hartford Financial Services Group (HIG), Novellus Systems (NVLS), and DaVita (DVA) were the stocks most recommended as longs by institutional brokers, while Cablevision Systems (CVC), Hewlett-Packard (HPQ), and Altera (ALTR) were recommended as shorts. The consumer discretionary, materials, and financial sectors had the biggest week over week change in long broker sentiment, while the telecommunication services, consumer staples, and information technology sectors had the largest weekly change in short sentiment.

Comments

[Brian McMorris:]

Good indicator David. This sentiment indicator is similar to several others which show Bullish sentiment right around 50%. Many of your readers miss the point, however, that normal bullish sentiment is probably above 60%. It is not until it breaches 70% that it can be considered wildly bullish.

Bearish sentiment, on the other hand, is considered very high when it breaches 50%, as it did early this year. The difference between the two has to do with the normal bias to somewhat bullish for a neutral market sentiment (the market rises on average due to profit growth in a healthy economy). It is a mistake when people interpret 50% bullish readings as "wildly bullish" and therefore the market ready for a significant decline (though a minor 3-5% correction may occur at any time).

Aug 09 02:12 PM

[mikemichaelson:]

HIG looks good here at 4.5 times earnings and 0.45 x Book Value.

Aug 10 01:27 PM