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Bill L.
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Methodology: setups require certain criteria to be met before trades can be executed, which include weighted statistical studies on several indicators of price, breadth, volume, and sentiment . Amount of risk taken is proportional to how many indicators are aligned. I mainly trade market... More
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  • Before You Buy Stocks, Read This: NAAIM Record Bullishness 6 comments
    Jan 31, 2013 2:56 PM | about stocks: SPY, QQQ, DIA, IWM, FXE

    So I usually do all the sentiment stuff on the weekends since the COT charts are not updated until Friday even. Today however I was looking at all the other surveys, most of which get's updated on Wednesdays and Thursdays... Looking over the NAAIM number my jaw dropped open.

    NAAIM:

    (click to enlarge)

    Yes, the chart is maxed out. It's literally off the scale.

    Looking over the raw numbers confirms this. The Average money manager is not only fully long, but employing leverage! This is the highest average ever recorded!

    (click to enlarge)

    Several other things pop out:

    1) The MOST BEARISH person to respond is 60% long stocks! That's the most bearish guy? That's another new record! The next largest long position held by the most bearish respondent was in 2007 at 50%.

    2) The lowest quartile is 85% long stocks. There was only one other instance that this was higher! (87%)

    Honestly, this kind of made my jaw drop when I looked over this so I wanted to get it out there as soon as possible. You know what they say about a crowded trade.... This looks about as crowded as it gets.

    Disclosure: I am short SPY.

    Stocks: SPY, QQQ, DIA, IWM, FXE
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  •  
    Thanks for the update Bill. Frankly, when I look over charts it seems like watching a freak show. Then I read the commentary encouraging retail to buy NOW, and it am unable to convince myself that they actually believe the crap they're shoveling. Rather, I assume that the WS psychopaths are throwing everything at this hoping to dump on retail.

    I'm not short yet. I'm hoping we get a little selling, another attempt at a new high. If it breaks higher but technicals diverge, or it fails to reach the old highs, either is the trigger I'm looking for. My fear is that the bottom simply drops out and I have to decide between chasing it or letting it go.

    Tough to trade a market when at almost any time, the Criminal Reserve can "leak" to their pet journalists some rumor of even more reckless policy to come, negating any clear short setup. I therefore may use options instead. We'll see.
    31 Jan, 03:35 PM Reply Like
  •  
    Bill,
    Thanks for this post and for the timing. I think that the market is way out of balance and I support Hussman's contention that the probability of future returns is as low as it has ever been.

    I am roughly 80% cash and 15% PM and PM stocks - with a few dividend stocks as well.

    Now with negative GDP for 4th quarter - I am comfortable with where I am - more so than 3 months ago.
    31 Jan, 04:04 PM Reply Like
  •  
    This only confirms my decision of adding to my shorts today. It like the Fed has made everyone forget we are re-entering recession and the ponzi finance system among Western governments. Thanks for the update Bill.
    31 Jan, 04:53 PM Reply Like
  •  
    But WMarkW, Inflation Trader says inflation is about to skyrocket aren't you worried your cash is going to be whittled away? You don't want to dump it all into $1650/ou gold or other commodities?

    Wait, what happened in 2008?

    I predict DOW 15000+ before the hammering begins, they HAVE to get retail to buy this crap before the bottom falls out.
    1 Feb, 11:18 AM Reply Like
  •  
    I am not worried about inflation yet. Currently in balance sheet recession. Remediation is occurring. Still several years. But, the government can screw thing up really well. All we need is some more taxes and you can kiss inflation good buy, until the world stops taking dollars for trade.
    1 Feb, 12:44 PM Reply Like
  •  
    Not only that.

    I have ADX on AUS market higher than at least 2002.

    14 RSI on same market was equalled last 2 times at 1987 top and 1989 top.

    Both crashed.
    5 Feb, 10:32 AM Reply Like
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