A SENTIMENT UPDATE TO INTERPRET HOW YOU WISH
What separates an amateur from a professional on Wall Street? The separation doesn't have anything to do with a professional designation, your pedigree, a license, years worked or people you know. It has little to do with the type of car you drive, how much hair gel you use, the type of music you listen to or the number of Gordon Gekko lines you can imitate. It has everything to do with knowledge. There are people in their mid-20s trading six figure accounts from a one room apartment who are more advanced in thought and analysis than some fund managers. The fact that a person wakes up each morning, puts on a suit and tie, scurries out the door into a large office full of trading screens does not make that person a professional. It makes that person a corporate participant on Wall Street. A cog in the giant machine that keeps the capital markets spinning. If the overly-observant media and public would simply choose their labels better, perhaps Wall Street would have a far better reputation than it currently does. The word professional is defined as: Having or showing great skill; expert. When a majority of retail investors who come to rely on "professionals" for advice have been burned over an extended period of time, the word professional then becomes compromised. One of the ways I classify a true professional on Wall Street, in the classic definition of the word, is an individual who knows what method of analysis to use when. This individual realizes that the markets take advantage of those who come to believe in one form of analysis, clinging onto it regardless of market conditions. Just as the markets change continuously so does its treatment of the popular analysis used over a certain time frame. Sentiment is one form of analysis that is constantly shifting in relationship to the markets. Whether it is the use of the VIX, various sentiment surveys, odd lots shorts, outstanding margin debt or the put/call ratios, there is no magic wand when it comes to sentiment. It is, perhaps, the most finicky form of analysis. There is no other popularized form of analysis, other than oscillators perhaps, that claim more causalities in trading and investing than blind trust in sentiment indicators. They fail constantly. They get investors into bear markets prematurely, often at the point where the final leg of the bear market is hell bent on the most severe destruction. They get traders to go short bull markets way early, just as the uptrend is entering its sweet spot. You have to know when to ignore it. Unfortunately, there...
5 CHARTS THAT WILL ALLOW YOU TO CREATE BEAUTY FROM ASHES DURING THE WEEK AHEAD
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4 LONG-TERM CHARTS THAT WILL GIVE YOU A WONDROUS SENSE OF PERSPECTIVE
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4 CHARTS THAT WILL GIVE YOU UNBLEMISHED PERSPECTIVE IN THE WEEK AHEAD
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4 WEEKLY CHARTS THAT DEMONSTRATE A MARKET THAT KEEPS EATING AWAY AT RESISTANCE
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THIS SENTIMENT INDICATOR JUST REFUSES TO GIVE BEARS WHAT THEY WANT
What is it about the current market that has left so many otherwise intellectually esteemed individuals dumbfounded when it comes to proper allocation of assets? Admittedly, this has been a difficult market to keep up with if the quality of your work is predicated by your ability to keep up with a benchmark. Without passing judgment or exercising bias of any sort let's look at exactly what is going on in the market as of the close Friday. Again, no passing judgment or exercising bias. Simply a look at what is occurring in 2013: - Dow is at an all-time high - S&P 500 is at an all-time high - Russell 2000 is at an all-time high - Nasdaq Composite is at a 10+ year high - Dow Transports are at an all-time high - NYSE Healthcare Index is at an all-time high - XLP - Consumer Staples ETF is blazing a new all-time high each week It is not just market strength we are talking about so far in 2013, it is strength in key sectors that typically attract a large international, institutional presence. Joe Smith from Wichita, Kansas doesn't wake up one day to turn on CNBC seeing that the markets are hitting new highs and put in a buy order for Kellogg or Colgate Palmolive. It is the institutional money that is seeing increased demand for a properly performing asset class that doesn't have an increasing potential for debt orchestrated periods of shock and awe to the downside that is buying up these names. It is not just any institutional investor either. It is Asian, European and Latin American institutions, alongside US firms that are piling into these names. The prototypical image of a rally of this nature being led by a bunch of dummies simply doesn't apply here. Those of you who are constantly drawn to this image need to rewire your synapses to correspond to the present day. This isn't the 90s or the 2000s. It is an entirely different market ecosystem that instilled enough fear and hate for equities into the masses that they are perfectly fine with allowing all-time highs to become nothing more than a news event, as opposed to anything having to do with enhancement of their overall net worth. When the general public does return to the market their footprints will be clear. Speculative stocks will rise in a manner that is disproportionate with any positive fundamental developments. Buying becomes sloppy. Pullbacks become more difficult to gauge accurately. The entire infrastructure of the market becomes increasingly unstable as a result of the erratic participation this class of investor brings...
