AAII Survey of Investor Sentiment Review: The Bullish Viewpoint

Posted on June 16, 2011 by David Durand

NOTE: Please go to here for the latest installment and scroll to below the first chart… Survey Says!  A Review of the  latest AAII Survey Investor Sentiment Data:

AAII Survey Review

Investor sentiment is interesting today.  Comparison to past similar AAII Survey Bull-Bear spreads yielded two possibilities that arose in reasonably comparable contexts.  Others that did not fit the same chart dynamics were excluded, meaning that if the market was rising from a low and had a similar sentiment reading, I ignored the data point.  I would rather look at sentiment values that occurred in similar chart contexts to today’s.

There were the two data points that fit today’s context of a -13.8% Bull-Bear Spread reasonably well:

5-19-2011 and 5-26-2011, -14.6% and -15.8 Bull-Bear Spread:  I lump these as they were just a week apart.  Obviously this was just last month, so the context is a decline.  The market had declined to date and then declined further to yesterday’s low.  So we could simply slide down another notch.  That would be another 5.4% minimum decline (just repeating the decline from 5-26 to the 6-15-2011 close for the SP500 index).  That is a very crude number obviously.

2-4-2010, -14% Bull-Bear Spread – This is the most promising comparison for the Bulls.  The reading at -14% was associated with a market low around 2-4-2010 and then a strong rally to the April high followed by a loss of all the gains and more to the July low.

If you were nimble and got out near the April 2010 high, you made money (1183.71 (if sold after first big down day)/1063.11 (2-4-2010 close)), namely 11.3%.  On the other hand if you sold in a panic at the July low, you would have lost 3.8%  The decline to the 2-4 low was 7.6% and the decline to yesterday’s close was 7.2%.  This is a pretty good parallel.

CONCLUSION:  Sentiment is at least supportive of a rally from here.   Given this backdrop of sentiment, the key is to follow the trend, regardless of which way the market breaks, up or down.  And since all the gains of the 2010 rally were lost temporarily in the decline that finished in July 2010, you will do better if you are nimble.  There has never been a better time to subscribe to my newsletter.  I update the markets after every market day.  The subscribe button is to the left at the bottom of the blue navigation bar.  Your first two weeks is completely free.

What we do not have this week is any kind of big capitulation in sentiment at a low.  We may not get that however, as February 2010 proved.

If you have not seen the likely targets of this SP500 Index pullback, you can review the video with the chart here: Key Technical Pointers on the Stock Market

Subscribe to the SP500Tracker ™  newsletter to get my recent analysis.  Just click the link above and sign up for the Tracker.

To review all the AAII Data: AAII Homepage

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

© 2011 David B. Durand, M.D. All rights reserved.

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Market Timing the US Dollar, SP500 Index and Gold

Posted on June 8, 2011 by David Durand

Would you have guessed that the CEO of JP Morgan Chase, Jamie Dimon, would be pleading with the Fed to leave the banks alone?  He gave the long list of actions that have been taken against the banks to create reforms that purport to prevent another financial meltdown.  Dr. Bernanke’s reply was to thank him for his positive assessment of his efforts.  Mr. Dimon obviously was not on the same wavelength.  These regulations are bad for banks as increased reserve requirements decrease the amount of money that can be lent.  At the same time, do the banks think that they can just go back to business as usual?   The fact that the Fed is bankrolling their profits by keeping interest rates at zero should raise the scrutiny of tax payers.

This explains the horrid action in banks over the past few weeks as the banks have led the market down.  Just take a look at a comparison chart between the SP500 Index and the BKX banking index to see this.

Gold (GLD IAU) has held up fairly well considering the fact that the dollar has been attempting to find some ground lately.  I commented on Twitter today that some support was held today.  If the dollar gets too strong, too fast, gold will likely run into trouble.  ( http://twitter.com/#!/DavidBDurandMD)

Gold CAN go up with the US dollar index.  It can do that in what I call the European Panic scenario.  It is a race downhill between the Euro and the US Dollar.  When the Euro is being heavily sold, the US dollar index benefits, but so can gold.  This week, the Euro has held some ground as the European situation, while not good, is not as bad as it was.  It is an ebb and flow.

And what about the stock market?  Well, the SP500 Index took another technical hit today by closing below 1284 at 1279.56.  It would take a recovery back above 1300.26 to start a legitimate bounce.  It seems the stock market is discounting a rise of interest rates that will occur once the Fed stops buying back our debt at the end of June with the end of QE2 as well as discounting a greater economic slowdown than predicted.  PE ratios are rising as the E’s fall due to rising costs of production (somewhat dissipated by the decline in commodities including oil recently) and falling demand on the part of the consumer.

If you have not seen the likely targets of this SP500 Index pullback, you can review the video with the chart here: Key Technical Pointers on the Stock Market

Also, investor sentiment is weak as I wrote here: Survey Says: The AAII Investor Sentiment Survey

If you liked Mark Haines as I did, please have a look at the last article I wrote about the cause of his death. The facts (vs. prior speculation) are here:Mark Haines Cause of Death:Case Closed

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

© 2011 David B. Durand, M.D. All rights reserved.

Posted in gold, gold etf, investment, Market timing, S&P 500 Index, US Dollar Index | Tagged , , , , , , , | 1 Comment

Mark Haines: Cause of Death – Case Closed

Posted on June 8, 2011 by David Durand

It is about time to lay to rest any wondering about the cause of CNBC “Squawk on the Street” anchor Mark Haines’ death.  I spoke to the Monmouth County medical examiner’s office this morning, which reports that he died of “natural causes,” namely “congestive heart failure due to cardiomegaly.”  The signing physician was apparently his personal physician, Dr. Eugeny Olenko of Forest Hills, N.J.

Lt. Reck of the Marlburo, N.J. police department told me the case was closed and they had “no doubt” about the cause of death.  The local police department took jurisdiction of the case from the county, I was told by the county prosecutor’s office yesterday.

The family requested a private autopsy, which is entirely appropriate in this case.  If the police and the medical examiner are both satisfied, we should be too.  The rest of the information will be kept private as it should be.  There is no reason for the family to comment further.

Cardiomegaly is not a disease, so the cause of death given is not a very accurate one in my opinion as a pathologist.  Although congestive heart failure could be cited as a cause, it may have not been the immediate cause of death, which could have been a ventricular arrhythmia (failure of the heart to maintain a normal rhythm).

Cardiomegaly means his heart was enlarged, which can occur for a variety of reasons.  Simply type the term into Wikipedia and you will get the long laundry list of actual causes of/associations with  heart enlargement from amlyloidosis to hyperthryroidism to heart defects to obesity.  We could guess that Mark’s smoking history and obesity could have contributed to this, but other factors could have come into play.  The rest is pure speculation.  The case is now closed.

What this report does is put to rest the notion that other than natural causes were involved in Mark’s death. 

As I said last week, rest in peace Mark.  Thank you for all your great work and the way in which you did it.

I brought this story to the attention of major networks, who NEVER followed through on tying up these loose ends in their stories on Mark’s passing (years later!).

If you appreciated this post, please “Like” it on Facebook or Re-Tweet the link at the Share “drop down arrow” below. Thank you.

Many of you may know that Mark did actually use market timing, most famously when calling the March 2009 bottom in the SP500 Index, since sometimes called the “Haines Bottom” in his memory.   I was lucky to catch his comment live and happened to have agreed with him.  What do you think?  Would Mark make a market timing call today?  He did not make market timing calls that often, and I distinctly remember him mentioning that fact as he made the March 2009 call.  He liked calling bottoms more than tops.  My personal practice is to call tops and bottoms, if the data are compelling. 

Before you leave, be sure to read my latest post on market timing the SP500 Index, Small Caps, Gold, and Interest rates: Market Timing Brief™

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Posted in Mark Haines, Market timing | Tagged , , , , , , , , , | 84 Comments

Market Timing the Markets: US Dollar, SP500 Index and Gold

Posted on June 2, 2011 by David Durand

Gold has remained strong even in the midst of the dollar rally.  Gold continued to go up even as the US dollar was pulling back.  Today the GLD (gold ETF) is still moving with the US dollar index (UUP), although both are falling.  This is typical of what I call the “European Panic” scenario.  It is at the moment a reversal of that scenario as confidence in the Euro is rising today.  You see there is a race on between the United States and Europe to see whose currency can go to zero first.  Unfortunately, I am just barely joking – at least until our policies change dramatically.

The US dollar index rally has lost strength over the past few days.  The first sign of weakness was the failure to hold onto the new high above the high of 5-13-2011.  In any rally, a pullback of 50-61.8% is “allowable,” meaning that the market can continue rallying after such a correction, but a pullback of more than that would more likely mean a retest of the recent US dollar index low at the minimum.  The other technical sign of weakness was the close the other day below the 50 day moving average.  This rally is definitely NOT as strong as that seen in Nov. 2010.

Today is out of character relative to recent behavior in that stocks are barely up at the moment (SP500 index; SPY; SPX), while gold and the US dollar are down.  One would expect a stronger stock market rally with such Euro strength.  The Euro as measured by FXE is up 0.95% today.  This situation will likely correct itself by Friday when the monthly employment report is isssued.  Banks have scrambled to lower their expectations for employment after the extremely weak ADP employment data on Wednesday.

As for the SPX (SP500 index), the trend is still down.  You can watch the last video I made on the SPX and the numbers still apply.  The market failed to hold the initial close above 1344.07, which was weak behavior. Until we exceed the high from Friday SP500 Index high of 1345.20 on a closing basis, the down trend is still intact.  The video with the chart is here: Key Technical Pointers on the Stock Market

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

© 2011 David B. Durand, M.D. All rights reserved.

Posted in gold, gold etf, Market timing, S&P 500 Index, Uncategorized, US Dollar Index | Tagged , , , , , , | Leave a comment

Mark Haines Will Be Missed

Posted on May 25, 2011 by David Durand

A word about Mark Haines’ (CNBC anchor) passing today.  You did not have to always agree with him to admire the natural and relaxed way he seemed to do his work.  When he got emotional, he had a point.  He brought his legal cross-examination ability to the table, clearly loved what he did, and brought some levity to a sometimes terrifically boring subject.  Rest in peace Mark. 

My medical training is in pathology.  From a medical standpoint, a death at home generally requires that the body be autopsied.  This is especially true in a case where there was no known acute illness.  If there were an obvious cause of death, the medical examiner would have announced it by now as a standard autopsy takes just a couple of hours generally.  Now if there is in fact no obvious cause of death, that does not mean there is any foul play etc. but further testing including toxicology would be required and that takes additional time.   So please be clear that the lack of any announcement may simply mean a normal investigation is being conducted.

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Market Timing the US Dollar:The Obvious Move is Down

Posted on May 18, 2011 by David Durand

Because the obvious move is down for the US dollar index, the fact that it is hanging onto the recent range of consolidation is positive.  That said, time is running out and you can expect a big move one way or another quite soon.   Given the recent reverse correlation to stocks (SP500 index) and metals, expect the latter to be hit hard if the dollar continues up from here and vice versa if the buck breaks again.

5-23-11 UPDATE: Not all metals are equally exposed.  Gold has been getting special treatment over the past few days.  Although this is not working for silver (SLV), gold (GLD; IAU) is being bought as dollars are bought, which means that gold is holding more or less steady after the initial pullback.  In fact, gold was up on Friday and is only down slightly today so far.  If gold continues to act this way, we may have the “European Panic Scenario” on our hands, which we experienced in 2010 as detailed in my PDF.  Please read my free PDF on Stocks, Gold and the US dollar.  It may save AND make you a lot of money going forward.

Free PDF Access and My latest SP500 Index numbers are here

If you want to see the PREVIOUS issue on the SP500 Index (the numbers are still current, although we’ve broken key support mentioned in the video): Previous Issue

Why is it so simple?  Because the entire game is being fueled by the Fed’s printing of US dollars.  They have committed to completing the repurchase of hundred’s of billions of Treasuries, a process that will end by June 30th they say.   Stay tuned to find out if the Fed has any other way to move the markets.  The Fed stated its goal to lift stock markets publicly.  It is NOT a secret. 

If the Fed does nothing, the liquidity that was in the system will suddenly be gone.  So what does that lead to?  Higher interest rates and an economy that slows due to those higher rates.  The fact that margin interest in stocks is at a very high level does not help either, as those buyers will be forced out of their trades as rates move too high for them to stomach.  Stocks will be sold, not because anyone really wants to but because they HAVE to.

Housing will be in more trouble with higher prevailing rates too.  This is one of the main reasons the Fed has been so persistent in keeping interest rates low.  So more people can service their debt rather than defaulting on it.  The source of this credit crisis was and is still housing.  The problem has been covered up, sort of like doctors may medicate a patient to hide symptoms temporarily, but when they stop the meds, the fever or headache comes roaring back.  That would be one more headache for this stock market.

The big risk to the US dollar index trade is that the Fed likely has some bullets left, some dollar killing bullets.   If they were to expend them now, they could bring the dollar back to the prior low.  What makes this unclear is the fact that the dollar has been beaten down so low.  They can afford to have the US dollar index rise a bit more and ease stocks back a bit more.   Which will they do?  Watch the market and you’re sure to find out!  As of the close in NY on Wednesday 5-18-2011, the dollar is still in play.  If the Euro can hold above the April 18th low (1.4156), the dollar may find itself in trouble again.

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

© 2011 David B. Durand, M.D. All rights reserved.

Posted in Market timing, S&P 500 Index, US Dollar Index | Tagged , , , , , | Leave a comment

Market Timing the US Dollar: Dollar UP, Stocks and Gold DOWN

Posted on May 12, 2011 by David Durand

So how is the US dollar rally going?  The dollar has just tested some support on the 15 minute chart for UUP at 21.55, but has slipped to 21.54. It now meets up with resistance at the 50 day moving average as well which is at 21.59.   I give the UUP numbers, because it’s easier for most to follow than the US dollar index.  As long as the 21.55 number holds on a close today, the US dollar probably will have more of a run up.  Remember that it has been pushed down relentlessly for months, so a bounce was becoming probable.

The trouble for stocks (SP500 Index and gold (GLD)) is that they are measured in value relative to US dollars.  That correlation has been going on for long periods of the time since the financial crisis began.  There was a period between 12-2009 and the 4-2010 high in the stock market where stocks and the dollar were directly correlated (both went up and down together with some turbulence in between).  But they have been inversely correlated from 8-2010 to the present time.

The US dollar will tell you when it’s time to buy stocks and metals again.  If the UUP moves sharply above 21.59, stocks and metals will likely correct further.  If it moves sharply below 21.55, stocks and metals will rally.  Remember that no rise or decline is straight up or down.  Use stop loss points to protect your capital in case you are wrong.

My latest SP500 Index numbers are here: Subscribe to my FREE SP500Tracker™ Market Timing Newsletter for immediate access

If you want to see the PREVIOUS issue: Previous Issue

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

© 2011 David B. Durand, M.D. All rights reserved.

Posted in gold, investment, Market timing, S&P 500 Index, US Dollar Index | Tagged , , , , | Leave a comment

Market Timing the US Dollar: Driving Down Stocks and Gold

Posted on May 5, 2011 by David Durand

The US dollar index is back in rally mode, but how much could it rally and what does this mean for the stock and metals markets including gold?  The US dollar index could move up to about 74.5 to 75, before running into resistance.  Stocks and metals including gold (GLD) will correct further as this happens.  They are inversely correlated to the US dollar.  Dr. Ben Bernanke has been printing money and buying our country’s own debt in order to keep interest rates low.  It is a way of effectively lowering interest rates below zero, which is where they have been for a long while.

Gold’s move down (GLD) is not yet done for this reason. GLD could stop at several places before the first serious bounce.  I doubt Friday’s bounce was the real deal.   GLD, the gold ETF will probably hit the 142 area,  the 139.54 breakout, or the 136 area before reversing for a bounce at least.

Stocks will likely fall further as well, although the SP500 index is struggling to maintain the prior breakout by moving back above 1344.07 this morning. It is now just a point below at 1343.10 as of 1:58 pm on 5-5-2011.  If the market does not hold this level on the close today, you can watch the video here to see Where the SP500 Index May Fall: SP500Tracker™ Video

We are back to the US dollar UP and stocks and gold DOWN scenario for a while.  This could only be reversed in the short run by more easy money, something that is not currently in the cards.  The Fed is planning on letting the QE2 program of “quantitative easing” run out by the end of June.  So with the easy money running out, the markets are correcting.

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Market Timing the US Dollar: Falling Off the Ledge

Posted on April 11, 2011 by David Durand

How is the US dollar index (USDX) doing in the market timing realm? Not very well thank you.  Gold has broken out as have commodities and the US dollar broke the key 75.63 level I wrote about last week.  I felt it was unlikely that the Fed or the European Central Bank would want the dollar to depreciate further against the Euro (EUR/USD).  So despite the fact that the Bank of Japan has been helping the dollar through its own efforts to heal the Japanese economy, the dollar index is tied more to the Euro and has gone down despite that help.  Other currencies in the dollar index including the Canadian Dollar have been strong as well.

So the US dollar index appears to be headed toward the market timing low of 74.23, which is not far off. After that, if the Fed STILL takes no action other than the jawboning that has been done recently, the US dollar will crack back to the 70.70 market timing low hit in 2008 during the midst of the financial crisis.  That would be devastating to European corporate sales and would further pressure the economically fragile countries like Portugal.

If the 74.23 level holds and a US dollar index rally takes place from that market timing low, that could pressure stocks, gold and commodities, and that is why I keep an eye on it every day for my subscribers.

My latest SP500 Index numbers are here: Subscribe to my FREE SP500Tracker™ Market Timing Newsletter for immediate access

If you want to see the PREVIOUS issue: Previous Issue

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

© 2011 David B. Durand, M.D. All rights reserved.

Posted in Euro, Market timing, US Dollar Index, Yen | Tagged , , , , | Leave a comment

AAII Survey of Investor Sentiment: This Sentiment Spread Stinks

Posted on April 9, 2011 by David Durand

4-09-2011: A Review of the AAII Survey ® of Individual Investor Sentiment.

The AAII Survey showed a Bull-Bear spread of 14.7% this week with 43.59% Bulls and 28.85% Bears.  (You can review all the data here: AAII Homepage)

So what does this mean? Going back to April 2010 when there were similar spreads of 13 on 4-29-2010, 19% on 4-15-2010, and 13% on 4-8-2010 we see that there is a potential for a major slide here.  The decline starting at the end of April 2010 was 17.2%.

If you go back further to 12-17-2009 when the spread was 14%, there was a rally of a 5.0% to the next high but that was followed by a correction of 9.2% that brought the SP500 index back to 1044.50 compared to 1096.08 on 12-17-2010.  On 10-15-2009 when the spread was 14%, the market pulled back from 1096.56 to 1036.19 for a fall of 5.5%.  On 1-8-2009, the spread was 14% and the SP500 index pulled back from 909.73 to the recent major low of 676.53 for a loss of 25.6% for the SP500 index.  Not very good news huh?!  The good news is that you will be prepared to take action, but only when you see other corroborating signals.

So the range of declines, and they were ALL declines, was from 5.5% to 25.6%.  Perhaps it will fall somewhere in between. Looking at the chart, a pullback of 7.7% would be the minimum and if it is worse, a retest of the April 2010 high would be a correction of 9.2%, which would be adequate to re-energize the Bull market.

My latest SP500 Index numbers are here: Subscribe to my FREE SP500Tracker™ Market Timing Newsletter for immediate access

If you want to see a PREVIOUS issue: Previous Issue

In my daily newsletter, I provide precise market timing get in and get out points, which my subscribers use as guidelines for their decisions. We are organized about when we buy and when we sell, because we don’t intend to take long trips down hill in the stock market.  Become a trial subscriber if you would like to learn more.  Simply go to the Subscribe page on the main site (SunAndStormInvesting.com).

CONCLUSION: Remember that the AAII investor sentiment numbers are just one indication of where the markets are headed, so acting on AAII sentiment as your sole market timing indicator is not likely to serve you well. Still, the data this week does say that sentiment is not supportive of this rally continuing much further before a significant correction.

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

© 2011 David B. Durand, M.D. All rights reserved.

Posted in investor sentiment, Market timing, S&P 500 Index | Tagged , , , , | Leave a comment