munKNEE.com Your Key to Making Money
Time for another sentiment update on what the various surveys and committment 
of traders have to say about the future price expectations for the U.S. stock markets, U.S. Treasury bonds, various currencies and a wide range of commodities including gold and silver. “And the surveys say…!”
So writes Tiho Brkan (http://theshortsideoflong.blogspot.ca) in edited excerpts from his original article* entitled Sentiment Summary (May Week 5).
[The following article is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Brkan goes on to say in further edited excerpts:
Equities
1. AAII Survey
This week’s AAII survey readings came in at 36% bulls and 30% bears. Bullish readings fell by 13% while bearish readings increased by 8%, as the market correction began. The bull ratio reading over the last one month (4 week average) has now exceeded 60% readings, but not near a “sell signal”…
2. Bullish Inc. sentiment survey
As can be seen in the chart below the bull ratio still remains on a “sell signal” at 72.5% reading. For referencing, recent chart of the II bull ratio chart can be seen by clicking clicking here.
Levels came in at 77% net long exposure, while the intensity came in at 30%. For months now, net long exposure has remained near some of the highest levels since the surveys inception. For referencing, recent NAAIM sentiment chart can be seen by clicking here.
4/5. Consensus Inc survey & Market Vane survey
These surveys remain at or near extremely elevated level associated with previous market tops (seen in the chart above).
6. Hulbert Newsletter Stock Sentiment surveys
These surveys have slightly pulled back from frothy levels seen last few weeks. For referencing, recent Hulbert Nasdaq Sentiment survey chart can be seen by clicking here.
7. ICI fund flows
This week’s ICI fund flows report showed “equity funds had estimated inflows of $2.46 billion for the week, compared to estimated inflows of $2.42 billion in the previous week.” For referencing, recent ICI global equity fund flow chart can be seen by clicking here.
8. Nova Ursa fund inflows
Rydex fund flows have jumped to extreme levels surpassing previous readings for the cycle. Nova Ursa fund flows in the chart below illustrates this well. Furthermore, leveraged bullish funds have experienced dramatic inflows and cash levels have pretty much collapsed over the couple of weeks.
9. Hedge funds
Latest equity commitment of traders report showed that hedge funds and other speculators now hold record bullish bets on US technology stocks. Commitment of traders reported that contract positions came in at over 148 thousand net longs….Bullish bets have been persistently extreme, indicating that a intermediate market top could be in place.
10. Conclusion Regarding Consumer Confidence
- Historically, business cycles and bull markets last about 5 years on average, so the fact that we are in our fifth year and consumer confidence is a 5 year highs, lets us now that we might be very close to the end of the bull market as it is the public that gets excited last.
During secular bear market trends, consumer confidence has done a great job warning us of a potential peak in stocks. This might be the case yet again today.
Bonds
Bond sentiment surveys continue to…[be] quite neutral and undecided. While many agree that bonds are overvalued in the long run, the question is where will the investors hide during a possible stock market correction?
1. Hulbert Newsletter Bond survey has now turned ever so slightly towards net short in its recommended exposure. For referencing, recent weekly chart of the Hulbert Bond Sentiment survey at the bullish extreme can be seen by clicking here.
2. Commitment of traders report shows that small speculators remain net short the Treasury Long Bond by 11,000 contracts. This week’s sell off in bonds (rise in yields) has most likely forced even more of a reversal in positioning, so the next weeks COT report could show a higher number of short positions. For referencing, a recent chart of Long Bond COT chart can be seen by clicking here.
Commodities
1. Commodity commitment of traders report showed that hedge funds and other speculators reduced net long bets towards 315,000 contracts. The current net long exposure still remains at one of the lowest levels since the beginning of 2009.
2. Commodity Public Opinion surveys in general show mild bearish tendency, but we are not yet at any major extremes. However, a lot of individual commodities are still very much disliked…with continuous multi-month short bets against Sugar and Coffee. There is a bit of a conundrum in the Energy positioning space, with Crude Oil bets near a historical high while Heating Oil bets are at a historical low. Which indicator is telling us the truth?
3. Alternative currency commitment of traders report showed hedge funds and other speculators entered panic liquidation in PMs sector, and in particular Gold’s positioning. The chart below shows that hedge fund positions have now fallen towards 57,000 bullish contracts, while in Silver positioning has dropped to extremely rare 4,500 contract level. Hedge fund levels are now at the lowest exposure extremes since early 2005, surpassing both Gold and Silver panic selling seen in later parts of 08.
Public opinion on alternative currencies like Gold and Silver still remains depressed, confirming the COT report discussed above. Not much to report from the previous weeks update.
Currencies
Latest currency commitment of traders exposure towards the U.S. Dollar increased to record high levels [as illustrated in the chart below]. Cumulative Dollar positioning is now exceeding $43 billion for the first time in history. Historical, all time, record net short positions…are evident on the British Pound and the Australian Dollar. Hedge funds also hold wildly large bearish bets against the Japanese Yen and the Swiss Franc. Furthermore, short bets are held on every single G-10 currency in the Trade Weighted Dollar Index, apart from the Kiwi Dollar.
Currency Public Opinion survey
readings on the U.S. Dollar still remain near some of the highest levels of optimism seen in years. Public Opinion on the Euro, Yen, Swiss Franc and even the Pound are now approaching extreme bearishness.Investors are positioning themselves in a manner where they view the Greenback as the only currency game in town. From a contrary point of view, that is usually a recipe for disaster as it precedes a major peak!
Automatically receive our easy-to-read articles as they get posted!
Sign up for our FREE Market Intelligence Report newsletter (sample)
“Follow the munKNEE” daily posts via Twitter or Facebook
Set up an RSS feed: It’s really easy – here’s how
[In Summary
Equities
During secular bear market trends, consumer confidence has done a great job warning us of a potential peak in stocks. This might be the case yet again today.
Bonds
While many agree that bonds are overvalued in the long run, Bond sentiment surveys continue to…[be] quite neutral and undecided.
Commodities
Soft: surveys in general show mild bearish tendency, but we are not yet at any major extremes. However, a lot of individual commodities are still very much disliked…with continuous multi-month short bets against Sugar and Coffee.
Gold & Silver: Hedge fund levels are now at the lowest exposure extremes since early 2005, surpassing both Gold and Silver panic selling seen in later parts of 08.
Currencies
Investors are positioning themselves in a manner where they view the Greenback as the only currency game in town. From a contrary point of view, that is usually a recipe for disaster as it precedes a major peak!]
(Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)
*http://theshortsideoflong.blogspot.ca/2013/06/weekend-sentiment-summary-may-week-5.html (Subscribe to Short Side of Long bi-monthly newsletter, an in-depth commentary of global financial assets and fundamental conditions. The newsletter is designed for an individual investor who requires more information than the weekly blog posts. Investment focus leans towards contrarian investing and opportunities of a depressed nature.)
Other related articles you might also like:
1. Here’s How to Crash-Proof Your Portfolio
With the stock market seemingly reaching new highs every day, should we worry about a crash that puts an end to the party? If so, how should investors prepare? Let us explain. Read More »
2. What Does Ongoing Low Inflation Mean for Investors?
There’s certainly no shortage of things to worry about right now related to the US economy but one thing we’re not too worried about right now is inflation. So what are the implications for investors? Here are four. Read More »
3. What Does Stock Market Valuation Multiple Suggests for Future of S&P 500?
“The end is near” has been the bears’ dire prediction since the start of the bull market on March 9, 2009. This year’s rally to new record highs suggests that the bears have lost their credibility and that investors are becoming increasingly convinced that the end is actually still far off. Read More »