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Derived from the aggregated analysis of thousands of actual trade ideas and data being sent in real-time from the sell-side to the buy-side, the First Coverage Weekly Street Sentiment provides a snapshot of market trends and a unique perspective of the mindset of the Street for the week ahead. The following data has been extracted directly from all information transmitted in the past week by sell-side representatives from more than 250 firms submitting information to portfolio and asset managers across North America via the First Coverage platform.

WEEKLY STREET SENTIMENT

  • Mid-morning Wed. Sept. 24th, near market lows for the week, the sell-side started exhibiting a much more bullish tone re: the overall market (see chart below).
  • Most Bullish industry by sentiment is Energy.
  • Most Bearish industry by sentiment is now Transports.
  • Both Consumer Cyclicals and Non-Cyclicals are now exhibiting bearish sentiment.
  • Most active sector is Technology.
  • Sell-Side continues to feel, at least for the near future, that the worst is behind Financials.

LOOKING AHEAD…

Towards the end of the last week the institutional sell-side started communicating to their buy-side clients that the market was oversold. With no clear focus on where it was suggested that capital be allocated the underlying theme seemed to be an overwhelming belief that a bail-out package was going to be passed shortly and once passed would have an immediate positive impact on the market.

No one should be surprised if this is exactly what comes to pass this week (which is looking increasingly likely). The sell-side collectively has been almost prophetic with their calls since we began aggregating their information.

Take just last week as an example:

  • They felt bearish about the market as a whole and then the Dow Jones fell 2.2%, the S&P 500 lost 3.3% and the Nasdaq declined 4% to finish at its lowest weekly close in over two years.
  • They were strongly recommending Goldman Sachs (NYSE:GS) at $100, only to see Warren Buffett step in the next week to purchase $5 billion worth of the company plus the right to buy another $5 billion at a future date, a full 15% higher than where most of the GS recommendations that went through First Coverage system were.
  • RIMM was the stock with the most bearish sell-side sentiment going into last week. Mid-last week Research In Motion disappointed and revised future guidance down sending the stock tumbling 27%.

A quick congratulations to the sell-side contributors using First Coverage hundreds of sell-side firms who are continuing to add value to their buy-side clients even in the toughest market conditions imaginable.

So, what do they feel going into this week? As shown by the graph below, they feel better about the overall market condition than they did last week.

However, to be clear, while the change in sentiment towards the market is bullish, the current level of the sentiment towards the overall market is barely neutral. In short, while the sell-side is felling better than they were last week, they are still feeling far from bullish.

Finally, while Basic Materials as an industry rose ten points in sentiment during the last week, sell-side professionals seem to be less enamored with gold specifically. Over the last week, multiple sell-side individuals suggested that their buy-side clients close out long GLD positions, while very few advocated new positions be initiated in the sector ETF. Perhaps, the sell-side feels the recent rally in gold is overdone and future gains won’t be so easy to come by.

Until Next week...

PREVIOUS SENTIMENT INDICATED…

On September 22nd: The most recommended stock amongst sell-side users to their buy-side clients last week was Goldman Sachs and the stock with the most bearish sentiment during the last week was RIMM (RIMM)e.

What’s happened since: Warren Buffett stepped in last week to buy over $5 billion of Goldman Sachs. RIMM missed estimates and lost almost 30% leading the tech sector down for the week.

On September 22nd: “Sell-Side doesn’t believe end-of-week market rally is for real and are indicating that trouble still lies ahead for broader markets.”

What’s happened since: The market falls almost 4% over the last week as jitters about the bail-out plan failing cause continued selling.

Source: Weekly Street Sentiment: Sell-Side Says the Bailout Will Help