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THE
SITE OF TECHNICAL MARKET INDICATORS
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Charts
of Interest
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10
REASONS WHY YOU SHOULD NOT LISTEN TO THE BEARS!
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| (October
2005) Short sales by NYSE specialists (smart money) fell to a historical
low according to the latest NYSE Member report by the SEC. The ratio fell
now to its lowest level since at least 1943, when reliable records of the
indicator were first compiled. Not even during the vicious 1973-1974 bear
market we saw such low readings of this indicator. On the other hand, short
selling by the public (dumb money) exceeded the redings after the 9/11 terror
attack. |
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| (October 2005) The chart below shows you the short sales ratio of NYSE specialists (smart money) and the public (dumb money). These readings are unprecedented in market history and they do not appear at tops. |
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| (October 2005) The chart below shows you the short sales ratio of NYSE members (smart money) and the public (dumb money). NYSE members are all the well known broker firms. They have a lot of inside information and the best brains working for them. These readings are also unprecedented in market history and they do not appear near tops. |
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| (October 2005) Odd-lot investors, the smallest of the small guys, (dumb money) are short like never before. It would be the first time in market history if these guys would be right. |
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| (October 2005) The chart below shows you that odd-lot investors, the smallest of the small guys, (dumb money) are afraid to buy right now. Low readings of this indicator appear near market bottoms and high readings appear near tops. |
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| (October
2005) The NYSE Members Report is compiled by the SEC and issued about
two weeks after the applicable date. This indicator is a useful tool to
determine what the experts are doing. If specialists, floor traders and
other members of the New York Stock Exchange are shorting heavily the market
is usually ripe for a correction. On the other hand, if they are doing relatively
little shorting it is most likely that the market has hit bottom, especially
if public- and odd-lot short sales increase at the same time. This is an
excellent indicator of the prevailing sentiment of the market pros. We also
use special moving averages to push the tops and bottoms forward an extra
two weeks or so. This
indicator is now outright bullish. |
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| (October 2005) The call/put ratio of all OEX options is at a 2-year low. |
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| (October 2005) The Global Futures Fear Indicator is a proprietary indicator of Global Futures and not available anywhere else. It was unknown until now to the investment community and to our knowledge there is no previous mentioning of this indicator in any financial publication. The Global Futures Indicator gives buy signals when it has readings between 0 and 10. This reliable indicator dipped into bullish territory after last week's sell-off. |
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| (October 2005) A good sentiment indicator is the Rydex Nova/Ursa ratio because it is backed by hard cash and not just polls. It reflects the sentiment of the small guys who put their money into funds. Speculators who invest in the Rydex Nova fund are considered bullish on stocks because the fund has a target performance benchmark equal to 150% of the S&P 500 index (SPX). The Ursa (bear) fund is designed to provide a performance inverse to that of the SPX by using a combination of short selling and options on stock index futures. Investors in this fund are considered bearish on stocks. Specifically, we divide the total assets in the Nova fund by the total assets in the Ursa fund to arrive at a Nova/Ursa ratio. A high Nova/Ursa ratio indicates an extreme amount of optimism (everyone investing in Nova) and a low Nova/Ursa ratio indicates an extreme amount of pessimism (everyone flocking to Ursa). As can be seen in the chart below of the Nova/Ursa ratio, the small guys are getting more and more bearish and that's bullish for a contrarian (daily chart of Dow Jones enclosed for comparison). |
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| (October 2005) When downside volume accounts for 90% or more of total NYSE volume, technicians talk about a wash-out or selling climax. In recent decades, a 90% down day meant a low was at least near, if not at hand. The Chart of Interest below shows you the last four selling climaxes and they indicated that downside risk was limited afterwards. (Chart of Dow Jones enclosed for comparison) |
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