Wall Street Sentiment Daily Trade Navigator for 8/07/07
Published Tuesday at 9:07 AM
By Mark Young of Equity Guardian Group

The NEW tthq.com Wall Street Sentiment message board password is xxx.

Short-Term Sentiment: Neutral.

Overall Intermediate-Term Sentiment: Neutral-to-Bullish.

Individual Investor Sentiment: Neutral-to-Bullish.

Small Speculator Sentiment: Neutral-to-Bullish.

Small Hedge Fund/Manager Sentiment: Neutral-to-Bullish.

Longer-term Trend: Positive.

Intermediate-term Trend: Negative.

Short-term (one-day) Signal: None, but I'm looking both ways.

We are trading these signals and others (well) intra-day with Premium subscribers--contact us for details.

Ideal ETF Portfolio (tracking portfolio):

50% long DIA at 133.41.
I may go after the TWM if we rally in order to hedge. I may also double up.

Introduction
This morning, GLOBEX is off a bit. The Fed is going to do their thing today and that can bring anything. I guess is that they hint that they MIGHT cut next go round, but they won't guarantee it. That might bring more buying or some selling and probably both. It's anyone's guess. We either have the low for this leg just behind us or just ahead. Just don't be too Beared up.

Message Board Sentiment
The message board sentiment poll shows Bulls at 34% and Bears at 40%, which is Bearish, since these guys tend to be right a bit more often than not. Participation was just above normal. The Actual Position Poll has 20% fully long and 26% partially long. 9% are partially short and 22.86% are fully short. This is above my 20% threshold, and that's somewhat Bullish. This is interesting sentiment. There are few cautious Bears, but fair number of stubborn Bears and plenty of Bulls. But then, these guys get positioned right often at turns. I have to say, this data allows for just about anything. In a down trend, the Fully Long Bull/Fully Short Bear ratio needs to be below 60% to give a Buy. We're at 85% but we'll drop off some larger numbers in the next day or two. It will take just two fairly low readings to give a buy.


For a larger chart, click the image above.

Check out www.traders-talk.com for early updates of the sentiment polls every day.

Our T-4 Turn Indicator went out Friday at 78 which is just shy of a signal. We note that some members had trouble accessing the site too. Could this be a Borderline Buy, maybe? I think that Thursday's signal was a Sell. I had thought it a repeat Buy, though clearly risky. Yeah, risky... No matter what, we're being told to look for a turn around here. Typically we want to see readings above 80 or higher before we look for worthwhile turns. This indicator doesn't catch every top and bottom, but it is a great "Heads up!" indicator.

Options Sentiment
Daily P/C ratio: 1.29. Positive.
10-day P/C ratio: 1.31. Buy.
Equity P/C ratio: 0.84. Neutral.
OEX PC ratio: 1.48. Neutral.
OEX 10-day PC ratio: 1.24. Bullish.
OEX $-weighted* P/C ratio: 1.53. Neutral.
QQQQ $-weighted* P/C ratio: 1.41. Neutral.
ISEE Sentiment Index: 94. Buy.
Relative VIX: Positive.

For a discussion and additional charts of the Relative VIX, click here: http://www.traders-talk.com/mb2/index.php?showtopic=73525

The options data are largely neutral, which is good news for the market, given the rally. I'm surprised that the Buy from ISEE after today's rally. That's Bullish too.

The ISEE Sentiment Index indicator is contrarian; traditionally, over 200 is too optimistic, under 100 is too pessimistic.

General Public Polls
Mark Hulbert's HSNSI fell to 5% and that's a solid drop in Bullishness. That's a Buy. Lazlo Birinyi reports that his Blogger Poll has 29% Bulls and 33% Bears on lower participation. Not a Buy, but also not reliable, I think. The Street.com reported a drop in Bulls to 26% and a jump in Bears to 52%. This is a good shift, but there don't seem to be all that many Bears, but there are also less Bulls than on Sunday. Participation was WAY down. That suggests that there's one more shoe to fall. Bulls are evading the damage. TSPTalk, a large site devoted to Thrift Savings Plan management and personal finance is flashing another Buy with 48% Bulls and 34% Bears. That's a Buy by their own standards, but I'm not at all comfortable with that. I say it's actually Bearish. Last week, AAII reported 45.88% Bulls and 40.00% Bears vs. 44.21% Bulls and 36.84% Bears. This is a solid increase in Bearishness, but totally expected and not excessive while the Bulls actually increased.  Investors Intelligence reported that Bulls fell to 47.2% vs. 53.9%, and Bears rose to 26.4% vs. 18.00. The shifts were solid and now show falling Bullishness--AFTER a major correction. This is some way from a Buy, still. LowRisk.com reported that their sentiment poll ended Sunday was 23% Bullish vs. 31% Bullish last week, and 67% Bearish vs. 40% Bearish the previous week. This is Bullish.      

Rydex Sentiment
Our Rydex data shows that non-Dynamic Bull funds had $16MM (net) outflows on a big reversal. The non-Dynamic Bear funds saw $2MM of (net) inflows. It looks like the amateurs dumping and doing a bit of shorting into strength. The Bearishness on  a day like Monday is Bullish. Dynamic Funds saw net Bull fund sells of $142MM, and Bear fund net buys of $14MM. The Dynamic players finally got reasonably well on their longs. They had to have been sweating a bit. I'd view the data as neutral to slightly Bearish. I'd say that folks are being prudent going into the Fed. The RSO showed an $81MM Bearish asset shift on a big rally--but it was primarily due to large Velocity sells. This is neutral, I'd say.

Conclusion
Last time, I said that folks were beginning to get scared and that such is an early sign of a low, as it's what gets folks to make uneconomic decisions, which set up great buying opportunities. That was worth repeating. It's the absolute key to understanding that what we do isn't just hocus-pocus black box stuff. This weekend, I had suggested that we'd probably see lower prices because things like theStreet.com poll weren't showing enough fear. It turns out, more fear showed up by Monday morning. I had said the sooner a bounce came, the more suspect it was and that's probably so, no matter what, but we have to admit that we can get more rally before we test. The latest sentiment is showing some real pessimism got built up in some sectors. The Fed does their thing and that's a wild card. If they don't say that right thing, then we go right back down. THAT would set up a good low, I'm pretty sure. And then, of course, we could just rally right on for a while. We just have to be flexible. Bigger picture, we probably need to bias long for the next few days, irrespective of a final shot down. As you can see, the rallies can be killer. Watch breadth for clues of a rally's staying power.

We do not have a ST Sentiment signal. I'm looking both ways. Yesterday, we took a day trade, snagged a quick and solid profit and then failed to re-enter, missing a good bit of predicted rally. Since we've been publishing our ST Sentiment Signals, we've had 52 trades and 39 winners. We're much more active now and I'm offering more set ups when I'm not going to be around. If you'd like a trial, feel free to contact us.

The Mechanical Senticator model went long at 144.21. The Subjective Senticator Model went long 1/2 there too and will add on weakness.  Remember, these models must trade in the direction of the Senticator or not at all.

Ideal ETF Portfolio (tracking portfolio):

50% long DIA at 133.41.

I may go after the TWM if we rally in order to hedge. I may also double up.

Past performance is no guarantee of future returns. All information included in this missive is derived from sources we believe to be reliable, but no guarantee can be made to that effect. None of the forgoing should be construed as an offer or solicitation to buy or sell any security. The publisher may have a long or short position in the funds or securities discussed at any given time. We aren't your advisor, unless you have a signed contract with us. Please review any trade that you do with your trusted advisor FIRST.

Note that we are also publishing on our private area on Traders-talk.com, too, for those who want on-line access to our charts and research and may be away from email. Password is at the top of this letter.

http://www.traders-talk.com/mb2/index.php?showforum=47

(you'll need to register and sign in on Traders-talk and you'll need an additional password to access the board. If you are a subscriber and you do not have a password, please contact us).

For more on using the WSS and the various sentiment poll data, click here:

http://www.WallStreetSentiment.com

Mark Young, Editor
800-769-6980
859-393-3335