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The NAAIM Manager Sentiment survey soars to 88.1 - "literally off the charts bullish," says...

The NAAIM Manager Sentiment survey soars to 88.1 - "literally off the charts bullish," says Schaeffer's Ryan Detrick, pronouncing himself concerned at so many professionals moved to one side of the boat. (longer-term chart)
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Comments (28)
  • GaltMachine
    , contributor
    Comments (1195) | Send Message
     
    This is kind of freaky. These investors really do believe that the fiscal cliff issue is already priced in to the markets.

     

    We keep hearing how people are bearish, but which people? The people that invest or the ones that don't?

     

    Seems to me that what matters most are the actions of market participants rather than the mythical "money on the sidelines".

     

    This mirrors what's happened in the last few weeks with all the other investment sentiment indicators. This is one of those rare times when investors are lined up on one side and that usually means that we are in store for a correction if you believe this is a contrarian indicator.

     

    If you click on the link it has a nice graphic. That should set up a nice entry point, I think.
    29 Dec 2012, 01:32 PM Reply Like
  • Tack
    , contributor
    Comments (14134) | Send Message
     
    I'm always a "watch what they do, not what they say" kind of guy. I think sentiment surveys in all areas are usually misleading and often useless. In the case in point, one can note almost no correlation between the SPX and variations in sentiment. As a predictor, it's been useless.

     

    Personally, I believe the market will continue to be supported by the vast overallocation of money away from equities. That may sound paradoxical, but equities have lots of downside support when there is a lot of cash and liquid investments (Treasuries, bonds) allocated away from equities and potentially ready to buy dips, opposite of when everybody is happy and heavily invested in equities, drying up liquidity to absorb any selling. Now, with trading volumes so low, it doesn't take much buying effort from the outside to offer support to equities, and any significant shift in capital allocations would see equities soaring.

     

    Therefore, just from a capital standpoint, I see major downside risks blunted and greater risk that market could move substantially higher on the digestion of any good news. And, frankly, there's been a lot of good news reported lately, mostly ignored while fiscal-cliff phobia plays out in the media.
    29 Dec 2012, 01:51 PM Reply Like
  • GaltMachine
    , contributor
    Comments (1195) | Send Message
     
    Tack,

     

    "one can note almost no correlation between the SPX and variations in sentiment"

     

    Did you click on the link?

     

    It does correlate very well with near market peaks as well as bottoms. The key to interpreting these reports is to look for the extremes in sentiment either bullish or bearish. In the chart above extreme bearishness corresponded with great entry points (March 09, last Oct 2011) and extreme bullishness with corrections (Oct 2007).

     

    So as a buy and holder this stuff probably doesn't matter but if you are an indexer who wants to buy in to the market you can time your entry points somewhat with this data and other indicators.

     

    Most of the time it is noise and provides no useful information but peaks in bullishness this high on this survey have been followed by sell-offs.

     

    "And, frankly, there's been a lot of good news reported lately, mostly ignored while fiscal-cliff phobia plays out in the media."

     

    That is true but as they say the economy isn't the market. In the short run emotions can have tremendous impact on the markets and this indicator is a reflection of the prevailing emotion at the time. In this case it is greed and apparently these professional investors agree completely with your viewpoint which is why they are so long equities.

     

    That doesn't mean you should sell but you might want to wait a little bit to buy. Generally a great time to buy is when these professional "investors" are fearful and selling rather than greedy and buying.
    29 Dec 2012, 01:59 PM Reply Like
  • Tack
    , contributor
    Comments (14134) | Send Message
     
    Galt:

     

    Yes, I clicked both links. The short-term link shows zilch correlation, and even the longer-term chart appears to be much better correlated for pessimistic bottoms than with tops.

     

    I am a firm disbeliever in market timing, so I would not use this sentiment data to buy or sell. To me, capital flows are much more important. Even as regards attempted market timing, the fiscal cliff provides a binary opportunity. Either we'll get a short-term panic, or we won't. It will be completely independent of sentiment.
    29 Dec 2012, 02:11 PM Reply Like
  • GaltMachine
    , contributor
    Comments (1195) | Send Message
     
    Tack,

     

    "I am a firm disbeliever in market timing"

     

    We could have saved a lot of time with this discussion considering you are not interested in evidence to the contrary :)

     

    "much better correlated for pessimistic bottoms than with tops."

     

    That is exactly correct. We do agree. Only the extremes in either direction matter which means 95% of the time this data is noise. When this number get extremely bearish that's a fear gauge and means to quote Buffett:

     

    “Be Fearful When Others Are Greedy And Greedy When Others Are Fearful”

     

    Buying at the peak of bearishness on this data would have had you entering the market in April 09 and Oct 2011 (S&P at 1070) which I think would have been great "timing". Of course in hindsight it takes a lot of courage to buy at those times.

     

    I don't advocate this for particular stocks just the broad index which is the Bogle approach.

     

    Of all the "black magic, voodoo doctor" indicators out there, I think sentiment indicators are the most useful because they track demand for stocks so in that sense they are actually quite logical and believable. Prices rise when demand is strong and fall when demand is weak.

     

    Good luck in the New Year.
    29 Dec 2012, 02:47 PM Reply Like
  • J 457
    , contributor
    Comments (951) | Send Message
     
    "Personally, I believe the market will continue to be supported by the vast overallocation of money away from equities."

     

    Tack, I think that's correct. Not because I agree its right for the country, but because the markets are being juiced by $85 billion a month in FED liquidity. Market stability is one of the mandates. Bonds are overbought and until people feel more confident they will remain there. Once rates go negative, or sentiment improves, money will slowly flow back into equities seeking higher yield. Until then, FED props up the market....
    29 Dec 2012, 03:10 PM Reply Like
  • Tack
    , contributor
    Comments (14134) | Send Message
     
    Galt:

     

    There were myriad buy indicators, aside from sentiment, in March 2009.

     

    Comparing various time periods, I see the following:

     

    2007: market highs, high trading volumes, coupled with excessive capital allocations to equities and real estate, i.e., liquidity and credit exhaustion

     

    2009: market lows, low trading volumes, coupled with low equity allocations and lots of liquidity, including TARP/QE

     

    2012: market higher, low trading volumes, coupled with low equity allocations and with lots of liquidity available, still

     

    This is why I don't see 2012 resembling 2007, so I don't anticipate any 2008-like events.

     

    P.S. I was suggesting that the "evidence" you cite is more indicative on the bottoms than tops, so the sentiment indicator may not be very instructive, presently.
    29 Dec 2012, 03:14 PM Reply Like
  • jbkemp
    , contributor
    Comments (9) | Send Message
     
    I agree with you and even if we get by the fiscal cliff someway we still have the debt ceiling to deal with a couple of weeks down the road. January is going to be trouble for the bulls and on the side of the bears. Plus, there is still a 37% real likely hood for another recession.

     

    And if that happens all the money that the feds are putting into the economy will go into short selling and options driving the market down even faster than it may go up.

     

    If we get by the fiscal cliff with something that will not increase the debt then have a likely hood of a bull market better than even 2012 because of all the money that is going into someone's pocket.

     

    I am long twix and VXN until I see something move in the other direction. The risk this could happen tomorrow night are three weeks from now. You could put your money on the side and wait and see if something positive will happen.
    30 Dec 2012, 05:27 AM Reply Like
  • The_Hammer
    , contributor
    Comments (4248) | Send Message
     
    tack, been watching this sentiment indicator for sometime and the pros are trailing the indices so they have turned all in to try to catch up. Time for caution. Especially the fast moving hedge fund money which could trigger a sharp hft bot sell off.
    30 Dec 2012, 07:30 AM Reply Like
  • The_Hammer
    , contributor
    Comments (4248) | Send Message
     
    tack would u agree that the 2007 type of activity is occurring in the treasury (bond) markets?
    31 Dec 2012, 06:34 AM Reply Like
  • Brian Bobbitt
    , contributor
    Comments (1956) | Send Message
     
    Bearish? I would be buying puts, and reverse ETF's. Bullish? I would be buying calls and up ETF's. Why am I standing pat in useless cash? Because I am confused and discontent and extremely worried about what the circus barker is going to show us next. I have been investing for over 45 years, since 1966 and never before have I been so 'at sea' not knowing what to do.
    I am referring to the short term. In the long term, (more than a month) I am looking at inflation and weak markets. Weak recoveries and governments doing only what they must to keep their paychecks coming, and not raise our ire beyond a boiling point. I for one, am considering "To hell with investing, and going to hide in annuities." I can get 6% guaranteed draw, and live out my life in happy check Mondays, but I want the excitement and entertainment the market offers. I also need the money I invest to generate income for my foolish needs and wants. I know how to do it, but would rather trade than park. So, I will continue to look for the best thing. I feel the best thing is REITs and Precious Metals for the next 24 months. But I am standing aside for the moment keeping what I have, and will consider the show unfolding to see what the major portion of my retirement funds will be doing. I hope investing in various instruments beyond the annuities.
    I am holding a lot of physical PM's, a little NLY and CIM. Some ARR, HD, FB, FAZ, SLV, & SIVR. In some annuities but most in cash, (BTW a lot of numismatics)

     

    Capt. Brian
    The Lost Navigator
    31 Dec 2012, 10:11 AM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (6732) | Send Message
     
    These surveys never add up with reality. Funds are not flowing into the market and haven't in years so how can investors be bullish? Fund flows speak the truth.
    29 Dec 2012, 01:36 PM Reply Like
  • june1234
    , contributor
    Comments (3066) | Send Message
     
    Well put.Everybody knows this is/has been a fed money printing rally. Most of Europe is/has been in recession and their markets are up 29% for 12, German chancellor just warned of tough times ahead while labor dept in this country has been reporting 400,000 new unemployment claims each week since Feb 08. None of that matters to the financial media or investors it seems. Chinese manufacturing just came in higher than expected. Not for the cliff that headline should be good for a serious bump in stock prices
    31 Dec 2012, 03:57 AM Reply Like
  • wyostocks
    , contributor
    Comments (8813) | Send Message
     
    Ever hear a realtor say that now was not a good time to buy a house? Always optimistic. No difference here.
    29 Dec 2012, 01:40 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    The Senate will come up with a bill this weekend and the House will drop its undies. Then the market will rally next week like it is 1999 all over again.
    29 Dec 2012, 01:45 PM Reply Like
  • Mad_Max_A_Million
    , contributor
    Comments (1175) | Send Message
     
    M I - If you really believe that, then you need to prepare for another credit downgrade. The worlds biggest bubble (bonds) could burst.
    But wait - Bernanke would just double-down on his funny money printing and bond buying scheme.

     

    How will we know for sure that this is a bad idea?
    Ans: When you keep seeing dollar bills blowing down the street and no one will pick them up.
    29 Dec 2012, 03:05 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    I will be dead by then, so that's cool by me. There will be another downgrade if and only if the Republicans play hardball on the debt ceiling. But, Obama really has them by the privates this time. He negotiated beautifully and painted the Republicans into a hard corner. So I doubt the Republicans will be politically suicidal enough to go through this same mess again in February. I think they will just bend over once and for all.

     

    Anyway, if the dollar crashes, some other currency has to gain. Which one will it be?
    29 Dec 2012, 03:12 PM Reply Like
  • Rousseau SC
    , contributor
    Comments (284) | Send Message
     
    Macro Investor,

     

    "I will be dead by then, so that's cool by me"? Are you seriously espousing your Democrat values ("what's in it for me") or are you sarcastic?

     

    I don't think the Repubs, other than the TEA partiers, care about the future of their progeny either.
    30 Dec 2012, 06:20 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    I am absolutely serious. Next you are going to ask me to give up my car to reduce carbon emissions and make the world a cleaner place for our progenies. That's a slippery slope. The next step would be to not cut food stamps so that kids can eat. That kind of liberal stance has no place in my book.
    30 Dec 2012, 12:28 PM Reply Like
  • Petrarch
    , contributor
    Comments (873) | Send Message
     
    ...market goes higher until Bernanke or the next Fed raises rates the third or fourth time up over 2% and unemployment is below 6% and core inflation is rising above 3% which should all come by about late 2015

     

    1600 by this time next year and higher after that to 1800 by mid 2015 that is where we are going - but not in a straight line

     

    P
    29 Dec 2012, 04:44 PM Reply Like
  • 1234gel
    , contributor
    Comments (1402) | Send Message
     
    Market goes higher.... Institutions and hedge funds will be loading up for the new year... lots of retirement funding needs a home..

     

    January is one of the best months, historically, and the fear factor is waning with the "big issue" now in the rear view mirror.

     

    New inflation fears will emerge, which is good for equities and bad for bonds... hmmm .... maybe some rotation into stocks !!
    29 Dec 2012, 08:33 PM Reply Like
  • 440978
    , contributor
    Comments (159) | Send Message
     
    February 14th, 2013 will mark an end to this whistling past the graveyard mentality. Then, and only then, will we see good entry points.
    29 Dec 2012, 11:52 PM Reply Like
  • Snoopy1
    , contributor
    Comments (1116) | Send Message
     
    Why Feb 14th?
    30 Dec 2012, 10:31 PM Reply Like
  • PassiveInvestorWins
    , contributor
    Comments (28) | Send Message
     
    The NAAIM survey is pretty useless. AAII is much more useful at extremes.
    30 Dec 2012, 05:27 AM Reply Like
  • GaltMachine
    , contributor
    Comments (1195) | Send Message
     
    passive,

     

    I like a composite of various indicators including AAII. Investor's Intelligence and the OEX in addition to AAII are all showing pretty high bullishness but not extreme.

     

    http://bit.ly/xQNJ14
    30 Dec 2012, 11:36 AM Reply Like
  • PassiveInvestorWins
    , contributor
    Comments (28) | Send Message
     
    Thanks Galt, not sure if Investor Intelligence or OEX data is available for download? I thought it was subscription based, so I have never been able to analyze it to see if it is useful.
    30 Dec 2012, 04:23 PM Reply Like
  • Snoopy1
    , contributor
    Comments (1116) | Send Message
     
    Two charts I look at are the AAII and the Morningstar Market Fair Value - together they give a pretty good indicator of buy points.
    30 Dec 2012, 10:34 PM Reply Like
  • 1234gel
    , contributor
    Comments (1402) | Send Message
     
    Snoopy... Feb. 14th is Valentine's Day. Are you saying that is the best day to fall in love with some new stocks?
    31 Dec 2012, 12:51 AM Reply Like
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