Sentiment Report - February 28, 2012

Posted 02/28/12 7:50 PM ET by Jason Goepfert                Archive





Smart / Dumb Money Confidence     


1  With a slow crawl higher, we're not seeing many new extremes among our guides, and we just keep trucking with the same kind of history-defying uptrend.  Until that changes, we probably won't see much of a change in our guides or anything else we follow.


2  The latest Public Opinion update showed further deterioration in US Dollar sentiment, which is now the lowest since last August.  Readings between 20% - 25% have coincided with at least short-term bounces, and we're not quite there yet.


3  As an aside, Apple announced that it will introduce the IPad 3 next week, helping to juice that stock.  After the introduction of the IPad 2, Apple jumped 2% the next day, and that marked its high for the next six months.  Click here for a chart.


The Smart Money is 38% confident in a rally.

The Dumb Money is 67% confident in a rally.


Smart/Dumb Confidence

 (click chart for larger version)


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Risk Summary  |  Today's Updates  Equity Indicators

Stocks and Sectors  |  Commodities  |  Comments 


Risk Summary


Short-term Risk Level:  6     




Intermediate-term Risk Level:  8     




Bottom Line

The incremental-gain-almost-every-day market continues unabated.  There has been no real change in sentiment or the outlook for the past several weeks at least.  There still appears to be high risk (see the Active Studies below), though several of those risks have dropped off after failing miserably.  Given the momentum and bucking off of so many formerly reliable patterns, we wouldn't bet on an imminent decline as long as the S&P levitates above 1350ish.


Bottom Line

For weeks, there has been no change here...stocks have been driven by impressive momentum, and recently we've discussed that such streaks usually bode well long-term.  More immediately, though, disturbing extremes in sentiment and a major reversal in the market's premier stock, Apple, bode ill.  Risk is high for a looming correction, most likely 2-4 weeks and 3%-8% in duration.

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Today's Studies & Updates



No New Updates Today





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Active Studies & Updates

See expired studies


Bearish for equities 


Bullish for equities 

Date Description Priority   Date Description Priority
02/27 McClellan Oscillator divergence High   12/23 Multiple follow-through days Medium
02/17 "Black swan" indicators rise Medium   12/09 4th quarter gain of +10% Medium
02/06 Surge in junk debt issuance Medium   11/11 3 months of large unfilled gaps Medium
02/03 Equity Hedging Index gets extreme Medium        
01/31 Extremely low inverse ETF volume Medium        
01/25 Rydex traders exit cash, enter leverage Medium        
01/25 Odd Lot buyers pull back Low        
01/19 Liquidity Premiums hit an extreme Medium        
01/10 OEX vs. equity options Medium        
01/09 Spike in Nasdaq / NYSE Volume Low        
09/02 Low ratio of cash to equities Low        


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General Equity Market Indicators

See all equity indicators


With very few of our indicators at a bullish (for the market) extreme, even none of them at some points, when we see the percentage of bearish indicators go over 30% of the total, it tends to precede market pullbacks.  That happened on January 20th and again February 3rd, but so far stocks have reacted much.  A couple of times in 2010, we saw the bearish indicators jump above 40% before a correction set in, so that's a possibility here, but we would still consider risk to be fairly high.



More history:    Short-term Score      Long-term Score     Indicators At Extremes


Indicators At Extremes

* New extreme

Bearish for equities 

Bullish for equities 

Price Oscillator - NDX


CSFB Fear Barometer

Put/Call Ratio - Equity Options Only

Put/Call Ratio - OEX Options Only

Put/Call Ratio - Total of All Options

Daily Cumulative Tick - NASDAQ

OEX Determination Index

Rydex % of Sectors with Assets > 50 Day Avg

Rydex Bull Fund Asset Flow

Fidelity Sector Breath


Composite Model

Put/Call Ratio - Total of Moving Averages

NH/NL Ratio - NYSE

VIX Transform

Sentiment Survey - AAII

Sentiment Survey - Investor's Intelligence

Sentiment Survey - Market Vane

Sentiment Survey - Consensus, Inc. Buy/Sell Ratio

Intermediate-term Indicator Score

Smart Money Confidence

Dumb Money Confidence

AIM Model


Intraday Cumulative Tick - NYSE

Liquidity Premium - QQQ


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Stock And Sector Sentiment

Go to sector breadth charts


The rally over the past several weeks has been concentrated in some of the more speculative sectors, such as Financials, Technology and Housing, while defensive sectors like consumer staples and Utilities haven't participated as much.  This isn't necessarily a bag thing, but when those speculative sectors get so overbought, the broader market generally takes a multi-week breather, or at the least price gains tend to moderate and flatten out.



See this Data Brief for more background on the Sentiment Scores


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Currency / Commodity Sentiment

See all currency/commodity indicators


With the correction from extremes in many currencies over the past couple of weeks, sentiment towards the US Dollar has become less enthusiastic, which is normal.  Traders have moved more into the Aussie Dollar.  We're also seeing some extremes in the energy contracts, particularly Unleaded Gas and Heating Oil.




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