Posted by barkand on December 26, 2010 under Cartoons, Market sentiment | 
Four months ago, on August 26, the American Association of Individual Investors (AAII) published the results of their latest survey of investors. That survey found that only 20.74% of their members were bullish on the stock market while nearly half, 49.47%, were bearish. You can see on the chart below, that the market hit bottom at that point and has gone up almost in a straight line since then.
Now, after a 20% gain, investors are much, much more bullish. According to the most recent AAII survey, over 63% of AAII members are now bullish on the stock market, compared to only 16% bearish. The numbers have not reached this extreme point in several years, and already some are calling for a market top based on this euphoric survey. But I think they should consult with Wile E. Coyote first. Excessive bullishness does not mark turns in the market as well as excessive bearishness.
You see, when Wile E. Coyote falls to Earth, he feels the pain immediately. But when he first runs off the edge of a cliff, he always manages to stay airborne for longer than you ever expect. From May of 2003 through January of 2004, the same AAII survey was frequently reporting strong bullishness among investors. Their survey published on June 26, 2003 found 71.4% bulls! But traders who reacted to that number, fearing the market had become too optimistic, got burned. On the 10-year chart of the S&P500 below, you see that extreme optimism did not coincide with a top in the market.
Posted by barkand on December 19, 2010 under Price trends |
I had been watching Northern Dynasty Minerals (NAK) this week hoping for a good entry point. The stock had jumped from $10 to the mid-13s in just a couple of days and I was looking for it drift back down to around $12. It would have been really swell if I had spotted it at $7 a few months ago, but here we are.
As you can see from the chart, the market did not want to cooperate with my wishes, and the shares never really dipped below the high 12 area – about 6-7% higher than what I was hoping to pay. After a few days of rest on low volume, the shares popped up to close at $13.39 on Friday, on higher volume. I won’t get it for the price I wanted, but this does look like a stock with a high probability of giving us a quick 3-5% profit before Christmas. The only question is whether we should buy one truckload of shares or two.
Not so fast! Let’s take a closer look at the price action on Friday, via this 5-minute chart from BigCharts. I would have expected that other people as desperate as me would have been buying shares at the end of the day when they realized they are not going to get their wish price. Instead, the opposite happened. There was alot of selling pressure in the last 30 minutes of trading. Why? I don’t know.
That last 30 minutes isn’t a deal breaker. But it does make me want to be more cautious. I think I will just wait and see how the price action unfolds on Monday.
Posted by barkand on under Uncategorized |
Here is an interesting little tool courtesy of Google Labs. Plug in a keyword, or several keywords, and google searches the text of some 5 million books. The result is plotted as a frequency versus any time period you choose.
In the chart below, I have plotted radio (blue), television (red) and some newfangled thing called internet(green).
Thanks to The Big Picture for the heads up.
Four months ago, on August 26, the American Association of Individual Investors (AAII) published the results of their latest survey of investors. That survey found that only 20.74% of their members were bullish on the stock market while nearly half, 49.47%, were bearish. You can see on the chart below, that the market hit bottom at that point and has gone up almost in a straight line since then.
