daily sentiment report - jim puplava€¦ · months ahead, but it didn't last long, and it...
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Smart Money / Dumb Money Confidence(Chart)
Monday, May 4, 2015
Headlines
The health-care sector has seen a surge of new offerings, with these companies now making up more than a third of all IPOs during the past six months, a record going back more than 30 years (see page 2).
Traders have certainly taken more of a shine to tech stocks than small-caps. The Optimism Index for QQQ is now 35 points higher than it is for IWM, one of the widest spreads in the past 10 years. When the spread 20 points or wider, QQQ under-performed IWM over the next two weeks after 57 out of 74 days. It got better as time went on, but QQQ still under-performed after a majority of days even up to three months later. It was most consistent as a shorter-term mean-reversion extreme, however. Click here for the QQQ Optix.
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5/6/14 8/6/14 11/6/14 2/6/15
Smart Money Dumb Money S&P 500
Content
Overview (Page 1)
Research (Page 2)
Active Research (Page 3)
Stocks Short-term (Page 4)
Stocks Int-term (Page 5,6)
Stock Breakdown (Page 7,8)
Sector Optix (Page 9)
Currency & Commodity Ranks (Page 10)
Currency & Commodity Optix (Page 11)
Portfolio (Page 12)
Disclosures (Page 13)
Sundial Capital Research12527 Central Avenue NE
Suite 165Blaine, MN 55449
Jason GoepfertPresident
Daily Sentiment Report
Bottom Line
Stocks Short-Term (Less than one month): Slightly bearish. Optimism dropped back, but tepid buying has been a negative signal.
Stocks Intermediate-Term (One to three months): Slightly bearish. As stocks decline from risky territory, that risk has declined a bit as sentiment ebbs from frothy levels, but is still above average, suggesting lower prices ahead.
Bonds: Bearish. In bond ETFs like BND, optimism has been muted, but it has recently become excessively optimistic in our main Optimism Index for the broader bond market.
Gold: Bullish. Gold stocks should see a rebound given a test of lows and "puke" conditions (see March 11 report), with "smart money" hedgers near multi-year extremes in their net long position.
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ResearchDaily Sentiment Report
05/04/15
The Wall Street Journal noted on Monday that initial public offerings from health-care companies have surged as a total of all IPOs over the past year.
Indeed they have, to the point that over the past six months the share of IPOs by health-care companies has hit a record for that sector, expressed as a percentage of all IPOs.
The percentage has now exceeded 35% over the past six months, surpassing the prior high reached last March, and August 1991 prior to that.
The chart above shows the ratio. It includes companies involved in health care services and products, as well as biotechnology and pharmaceuticals.
The further back we go, the less reliable the data, but the first peak occurred in June 1982, after which the sector actually accelerated to the upside, using the Fidelity Select Health Care Portfolio as a proxy for the health-care sector.
The next peak, in 1991, also saw health care ramp up in the
months ahead, but it didn't last long, and it then lost nearly -40% during the next year and a half.
After the surge in tech IPOs cooled in 2000 and 2001, health-care companies again made up more than 25% of all new offerings. Like just about every other sector, it then got annihilated during the bear market.
It surged again heading into the spring of last year. There was a subsequent hiccup as the sector dropped about 14% during March and April, but it recovered quickly.
Now we're back at a new record. Based on the history, it seems like a dicey time to be heavily overweight a sector into which so much new capital is flowing. Get while the getting's good, but get ready to exit just the same.
Fidelity Select Health Care Portfolio Log Scale
Health-Care IPOs As % Of All U.S. Priced IPOs
Source: Bloomberg Finance LP Copyright © 2015 Sundial Capital Research sentimenTrader.com
Jun 198225%
Aug 199129%
Jul 200025%
Nov 200125%
Mar 201431%
Apr 201536%
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Active ResearchDaily Sentiment Report
05/04/15
Broad Stock Market
Date Description Bias Time Frame Priority
1-May-2015 Index futures speculators holding low exposure Bullish Intermediate Medium
30-Apr-2015 AIM Model showing optimism heading into May Bearish Intermediate Medium
20-Apr-2015 Options speculation strikes again Bearish Intermediate Medium
10-Apr-2015 VIX traders betting on a jump Bearish Intermediate Medium
9-Apr-2015 Penny stock trading is subdued Bullish Long Very Low
8-Apr-2015 Trend persistence nears record high Bearish Long Medium
30-Mar-2015 Buying power dries up Bearish Intermediate Low
6-Mar-2015 Cash Is Not In Demand Bearish Intermediate Medium
5-Mar-2015 Tech Insiders Sell While Their Companies Buy Bearish Intermediate High
4-Mar-2015 Stock Shares Outstanding Dump While Volatility Shares Jump Bearish Intermediate Low
3-Mar-2015 Smart Money Vs The Public In The Options Market Bearish Intermediate Low
2-Mar-2015 Speculation Reaches The Options Market Bearish Intermediate Medium
26-Feb-2015 Not A Good Extreme In Sentiment Bearish Intermediate High
Other Markets
Date Description Market Bias Time Frame Priority
17-Apr-2015 Smart money is betting on agriculture Ag Bullish Intermediate High
7-Apr-2015 Volatility nears previous bottoms Crude Oil Bullish Long High
26-Mar-2015 Bond traders show extreme optimism Bonds Bearish Intermediate High
11-Mar-2015 Gold stocks completing "puke" phase Gold Bullish Long High
The Active Studies highlight studies we've discussed in prior reports that are still "active". This means that the market is still within the time frame that was indicated as being effective, meaning it showed returns or consistency that was significantly different than random during the study period. For some studies, there was not a concrete time frame given, but rather general market conditions. The study would remain "active" as long as those market conditions were in effect.
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Stocks - Short-term Summary (Less than one month)Daily Sentiment Report
05/04/15
Risk Level:
6 6
An interesting point right here, as the S&P is on the verge of breaking down out of what had been a rising pattern. A break of the lower trendline, right about here, is a first warning sign. A lower low (below 2050) would raise the risk that the uptrend is over.
Back to neutral, but readings like Friday tend to have after-effects lasting several days.
Neutral.
Once again, buyers stepped in after a very minor oversold reading.
Nearing overly optimistic territory.
Neutral.
Bottom Line:
The S&P 500 fund, SPY, opened and closed in the bottom 25% of its range on Monday, and had exceeded its prior high close intraday, suggesting disinterested buyers at high prices. That led to positive returns over the next three days 41% of the time out of 22 instances. Optimism has dropped, but the weak price indication has kept the risk level above average.
Low risk (0) High risk (10)
S&P 500 - Past 90 Days
Optimism Index
S&P 500 Down Pressure (3-day average)
% Of S&P 500 Stocks > 10-Day Average
Equity Put/Call Ratio
Inverse ETF Volume
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Stocks - Intermediate-term Summary (One to three months)Daily Sentiment Report
05/04/15
Risk Level:
6 6
A healthy long-term trend with a series of higher highs and higher lows.
In extreme optimism territory, though off the historic readings seen in February. This isn't unusual following what should be a "maximum" reading from February.
Nearly to an extreme that would indicate that stocks are over-valued relative to bonds.
Neutral.
Neutral.
Neutral.
Bottom Line (Updated 04/30/15):
Risk has been above average while price has oscillated in a tight range, faking out those betting on breakdowns and breakouts. We're still seeing an elevated number of overly optimistic indicators and troubling studies, and risk remains above average because of it.
S&P 500 - Past Year
Optimism Index
Stock / Bond Ratio
% Of S&P 500 Stocks > 50-Day Average
De-Trended Equity Put/Call Ratio
SPY Liquidity Premium
Low risk (0) High risk (10)
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Stocks - Intermediate-term Summary (One to three months)Daily Sentiment Report
05/04/15
MaximumOptimism
Last Gasp 1
Re-Test
Lower Low(3%-5% decline)
MaximumPessimism
Re-Test 2
Explosive Rally 3
Belief-Building Phase
Belief-Building Phase
WE ARE HEREHighest Probability
The Typical Sentiment Cycle is a real bull-to-bear phase from the S&P 500 in 1966. It displayed the classic price phases that many cycles exhibit. The WE ARE HERE box is a partially subjective judgment based on sentiment conditions, price behavior and fundamental ratios. It should proceed forward the majority of the time, but may skip backward as new information becomesknown. These are rough approximations only.
The case against using something like this is that every cycle is different. No two markets ever look exactly the same, or exactly like this. Sometimes, like the mid-1990s, the middle phase just keeps going and going and going. More typically, stocks spend 1-3 months in each phase, though there is wide variation in that, from weeks to years.
Note that "maximum optimism" and "maximum pessimism" normally occur before a market peak and market trough, respectively. It's rare for bull phases to end when optimism is at its highest point. The same goes for bear phases, but that is less consistent -sometimes a bear will end in panic and both price and sentiment will bottom at the same time.
BULL PHASE BEAR PHASE BULL PHASE
1 What to watch for: Divergences with breadth figures; "This time is different" articles; arrogance from bullish commentators; proliferation of new types of funds; closing of long-time funds that are not fully invested.
2 What to watch for: Divergences with breadth figures, doomsday prophesies on mainstream media, stocking up of staples among consumers, heavy trading activity, ridicule of "knife catching" buyers.
3 Watch to watch for: Explosive price gains over 2-3 day periods; massive thrusts in market breadth; "Just another bear market rally" articles; minimal pullbacks after short-term overbought readings
CORRECTION
Fear-Building Phase(More than 5% decline)
CORRECTION
WE ARE HERELower Probability
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Stocks - Sentiment BreakdownDaily Sentiment Report
05/04/15
Indicators Showing Excess Pessimism (Chart) Indicators Showing Excess Optimism (Chart)
Ordered from most to least pessimistic Ordered from most to least optimistic
Odd Lot Shorts Equity / Money Market Ratio
Optix Optix Net Available Cash - NYSE
Volatility Volatility Retail Money Market
Options Options Rydex Ratio
Pressure Breadth Rydex Money Market %
Oscillator Surveys Insiderscore.com Buy/Sell
TICK C.O.T. OEX PutCall Open Interest
Shorts Dumb Money Confidence
Cash Rydex Bull/Bear Spread
Insiders NAAIM Managers
Rydex AIM Model
Smart - Dumb Spread
% Showing Excess Optimism
Options Speculation Index
OEX PutCall
Rydex Beta Chase Index
AAII Allocation - Stocks
Mutual Fund Cash %
VIX
% Showing Excess Pessimism
Smart Money Confidence
Short-Term Optix
Fidelity Funds Breadth
Equity Hedging Index
Market Vane Bulls
Intermediate-Term Optix
CS Fear Barometer
VIX Term Structure
New High / New Low - NYSE
Stock / Bond Ratio
Short-term Intermediate-term
Breakdown Of Indicators At ExtremesIndicator Groups
Broad Market
45%
2%0%
10%
20%
30%
40%
50%
60%
70%
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15
% Of Indicators At An Extreme
70
55
55
50
75
45
50
85
60
70
55
55
50
60
55
50
ExcessOptimism
ExcessPessimism
ExcessOptimism
ExcessPessimism
Copyright © 2015 sentimenTrader.com
S&P 500
% ShowingExcess Optimism
% ShowingExcess Pessimism
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Stocks - Sentiment BreakdownDaily Sentiment Report
05/04/15
Sector, Industry, Stock and Country Ranks
34
40
44
44
45
46
47
48
49
53
53
54
58
61
62
63
64
67
68
71
71
Semiconductors
Homebuilders
Retail
Health Care
Biotechnology
Consumer Discretionary
Gold Miners
REITs
Real Estate
Junior Gold Miners
Oil & Gas
Utilities
Industrials
Volatility
Metals & Mining
Technology
Consumer Products
Financials
Oil Services
Basic Materials
Energy
Sectors Ranked ByLowest - Highest Optimism Index
31
37
42
43
44
45
45
45
45
46
56
56
56
57
58
58
59
61
61
62
Trucking&Leasing
Home Builders
Savings&Loans
Cosmetics/Personal Care
Coal
REITS
Leisure Time
Holding Companies-Divers
Food
Retail
Semiconductors
Iron/Steel
Agriculture
Building Materials
Entertainment
Beverages
Mining
Real Estate
Pipelines
Airlines
Industries Ranked ByLowest - Highest Optimism Index
10
12
12
12
12
14
14
14
14
15
84
85
86
88
88
89
89
90
92
96
Sanderson Farms
Arch Coal Inc
Government Prope
Petmed Express
Quiksilver Inc
American Science
3D Systems Corp
Deltic Timber
Ezcorp Inc-A
Uti Worldwide
Cohu Inc
Dst Systems Inc
Discover Financi
Invesco Ltd
Anadarko Petrole
Steel Dynamics
Apogee Enterpr
Park Electrochem
Sei Investments
Ptc Inc
Stocks Ranked ByLowest - Highest Optimism Index
26
31
41
42
49
49
56
56
57
59
60
61
62
72
95
Housing
Biotechnology
Russell 2000
Consumer Discretionary
Industrials
Consumer Staples
Health Care
Financials
S&P 500
Basic Materials
Utilities
Nasdaq 100
Technology
Gold Bugs
Energy
% O
f C
om
ponents
> 5
0-D
ay A
vera
ge
Sectors Ranked ByOversold - Overbought Breadth
5851 54 58 60 62 63 64 67 69 72 72 72 74 76
UK
Austr
alia
Un
ited
Sta
tes
Ja
pa
n
Bra
zil
Ge
rman
y
Ch
ina
India
Fra
nce
Mexic
o
Em
erg
ing
Mark
ets
Spa
in
Ru
ssia
Ita
ly
Ca
na
da
Countries Ranked ByLowest - Highest Optimism Index
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Stocks - Sentiment BreakdownDaily Sentiment Report
05/04/15
Basic Materials: Biotechnology: Consumer Discretionary:
http://www.sentimentrader.com/subscriber/icharts/etf_xlb.php http://www.sentimentrader.com/subscriber/icharts/etf_ibb.php http://www.sentimentrader.com/subscriber/icharts/etf_xly.php
Consumer Staples: Energy: Financials:
http://www.sentimentrader.com/subscriber/icharts/etf_xlp.php http://www.sentimentrader.com/subscriber/icharts/etf_xle.php http://www.sentimentrader.com/subscriber/icharts/etf_xlf.php
Health Care: Homebuilders: Industrials:
http://www.sentimentrader.com/subscriber/icharts/etf_xlv.php http://www.sentimentrader.com/subscriber/icharts/etf_xhb.php http://www.sentimentrader.com/subscriber/icharts/etf_xli.php
Metals & Mining: Oil & Gas: Real Estate:
http://www.sentimentrader.com/subscriber/icharts/etf_xme.php http://www.sentimentrader.com/subscriber/icharts/etf_xop.php http://www.sentimentrader.com/subscriber/icharts/etf_iyr.php
REITS: Retail: Semiconductors:
http://www.sentimentrader.com/subscriber/icharts/etf_vnq.php http://www.sentimentrader.com/subscriber/icharts/etf_xrt.php http://www.sentimentrader.com/subscriber/icharts/etf_smh.php
Technology: Utilities:
http://www.sentimentrader.com/subscriber/icharts/etf_xlk.php http://www.sentimentrader.com/subscriber/icharts/etf_xlu.php
Sector Optimism Index Snapshots (Past Year)
71 45 46
64 71 67
44 40 58
63 54
62 53 49
48 44 34
The Sector Optimism Indexes are based on sentiment in the respective ETFs. This includes option market activity, volatility expectations, premium/discount to NAV, fund flows and price activity. The Indexes can go from 0 (most pessimistic) to 100 (most optimistic).
For most of them, sentiment above 70 can be considered extreme optimism, after which the sector tends to struggle. Sentiment below 30 tends to indicate exreme pessimism, after which the sector usually rallies. The box will turn red if the score is above 70, and green if below 30.
Click here for a sortable table of the most active ETFs, including these, and links to interactive charts.
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Bond, Currency and Commodity BreakdownDaily Sentiment Report
05/04/15
Commodity, Currency and Bond Ranks
24
28
34
42
47
49
71
Euro
Aussie Dollar
British Pound
Canadian Dollar
Swiss Franc
Japanese Yen
U.S. Dollar
Currencies Ranked ByLowest - Highest Optimism Index
36
38
41
41
48
48
59
60
69
71
LQD Optix
TLT Optix
10 Year
BND Optix
5 Year
30 Year
HYG Optix
JNK Optix
2 Year
Eurodollar
Bonds Ranked ByLowest - Highest Optimism Index
17
18
21
24
24
24
25
29
30
30
36
38
40
41
41
43
47
51
57
Lumber
Sugar
Natural Gas
Soybeans
Gold
Wheat
Orange Juice
Coffee
Hogs
Corn
Crude Oil
Platinum
Heating Oil
Copper
Silver
Unleaded Gas
Cocoa
Cotton
Cattle
Commodities Ranked ByLowest - Highest Optimism Index
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Bond, Currency and Commodity BreakdownDaily Sentiment Report
05/04/15
Aussie Dollar British Pound Canadian Dollar Euro
Japanese Yen Swiss Franc U.S. Dollar
Crude Oil Heating Oil Natural Gas Unleaded Gas
Corn Soybeans Wheat
Copper Gold Platinum Silver
Cattle Cocoa Coffee Cotton
Hogs Lumber Orange Juice Sugar
Commodity and Currency Optimism Index Snapshots (Past Year)
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Portfolio (please read disclosure page)Daily Sentiment Report
05/04/15
How I am positioned:Current Target Over/Under Last Increase/
Market Ticker Allocation Allocation Weight Change Decrease
STOCKS
US Broad Market VTI 0.0% 20.0% (20.0%) 13-Apr-2015 Decrease 0
Emerging Markets DREGX 8.9% 20.0% (11.1%) 6-Jan-2015 Increase 13442
International Stocks TBGVX 20.8% 20.0% 0.8% 20-Mar-2015 Decrease 31532
29.6% 60.0% (30.4%)
BONDS
Total Bond Market BND 2.5% 10.0% (7.5%) 2-Apr-2015 Decrease 3753
2.5% 10.0% (7.5%)
COMMODITIES
Energy XLE 1.4% 3.3% (1.9%) 1-Apr-2015 Increase 2049
Grains DBA 2.2% 3.3% (1.1%) 1-Apr-2015 Increase 3352
Gold GDXJ 8.0% 3.3% 4.7% 24-Apr-2015 Decrease 12105
11.5% 9.9% 1.6%
CASH / SPECIAL OPPORTUNITIES
Canadian dollar FXC 2.2% 20-Mar-2015 Increase 3268
Cash CASH 55.6% 84359
57.8% 20.0% 37.8%
151701
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DisclosureDaily Sentiment Report
05/04/15
Risk Avg % Avg Max Avg Max Risk Avg % Avg Max Avg Max
Level Return Positive Loss Gain Level Return Positive Loss Gain
0 - - - - 0 1.6% 64% -6.0% 8.6%
1 7.3% 100% -0.2% 8.3% 1 3.8% 62% -3.5% 6.6%
2 2.3% 73% -1.4% 2.5% 2 5.3% 77% -3.5% 7.4%
3 0.1% 52% -1.4% 1.5% 3 5.4% 70% -5.3% 8.2%
4 1.0% 70% -1.0% 2.0% 4 2.7% 63% -3.6% 4.8%
5 0.3% 56% -1.1% 1.1% 5 2.6% 65% -4.7% 5.8%
6 0.4% 59% -0.8% 1.1% 6 1.5% 56% -5.6% 4.8%
7 0.4% 66% -0.7% 1.1% 7 1.1% 58% -5.2% 5.0%
8 0.3% 57% -1.4% 1.7% 8 0.8% 54% -3.8% 4.0%
9 - - - - 9 -6.9% 25% -11.9% 3.5%
10 - - - - 10 -4.0% 39% -12.3% 2.8%
S&P 500 Returns Past 3 Years
The Short-term risk level travels on a scale of 0
(extremely low risk) to 10 (extremely high risk).
Based on our study of indicators and technical
movements, it represents the risk to traders of a
correction over the next week.
S&P 500 Returns Past 10 Years
The Int-term risk level travels on a scale of 0
(extremely low risk) to 10 (extremely high risk).
Based on our study of indicators and technical
movements, it represents the risk to traders of a
correction over the next 3 months.
The data and analysis contained herein are provided “as is” and without warranty of any kind. Sundial Capital Research, Inc., its employees, or any third-party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any publication published by Sundial Capital Research, Inc. No report shall be considered a solicitation to buy or sell any stock or security. This communication reflects our opinions as of the date of this communication and will not necessarily be updated as views or information change. Sundial Capital Research, Inc. and its respective employees may have lpositions in the securities discussed herein and may purchase or sell such securities without notice. The information contained herein is believed to be accurate to the best of our knowledge, and we make no guarantees that there will not be errors from ourselves or third-party data providers. We make every effort to validate data integrity, but occassionally errors do occur and we subsequently make an effort to disclose that to subscribers. Further distribution prohibited without prior permission.
The Correction Risk Level is a quick way to gauge what our indicators and studies are suggesting. The higher the risk, the more likely the market is to decline. Another way to look at it is in terms of cash. If the Correction Risk Level is 0, then we would be more inclined to keep 0% of our portfolio in cash (i.e. we would be fully invested). But if the Correction Risk Level is 10, then we would be more inclined to keep 100% of our portfolio in cash (i.e. no exposure to stocks).
We take the overriding trend of the market into account. If the indicators are showing excessive amounts of bearish opinion, then the market is more likely to respond favorably to that if we're in a bull market, and the Risk Level would be lower. But if we're in a bear market, then bearish sentiment extremes are less reliable, and the Risk Level would be a bit higher. We take our studies into account as well. So if the indicators are murky, but we have some very compelling studies suggesting the market should rally, then the Risk Level might be lower than the indicators would suggest. The default Risk Level is 5, which is where it would be if there is no edge present among our indicators and studies.
We do not suggest using these Risk Levels in any kind of mechanical way. They are meant to help support any existing technical or fundamental research you may be doing. When the Risk Level is very high, though, we do recommend backing off on long positions or possibly considering short positions (especially during a bear market). For both time frames, a Risk Level below 3 can be considered "low risk" while a level above 7 can be considered "high risk". The more extreme the Risk Level, the more likely the market will respond in a timely manner. The most likely time for these Risk Levels to fail is during a time of trend transition from a bull to bear market (or bear to bull). That is often good information in itself - if the Risk Level is very high, for example, but prices continue to rise, then that is a heads-up that buyers are very interested, and we will likely see even higher prices going forward.
The Portfolio is a real-money portfolio for Jason Goepfert. It is structured as an IRA, and is a supplementary account to other investments. The purpose is not to "get rich". The account is meant as a store of savings, and not a trading vehicle to maximize gains. This is not meant as a recommendation to buy or sell any security. It is by no means intended to represent an ideal or recommended portfolio for anyone other than the author. It can change directions heavily depending on short-term volatility, and does not reflect a buy-and-hold 60/40 portfolio recommended for most long-term investors. The purpose is to simply show "skin in the game". Changes in the Portfolio will be reflected the day they are instituted, without notice. Positions taken are typically in highly liquid markets with a primary focus on ETFs and index options contracts. During a runaway bull market in US stocks, it will under-perform; the intention is not to catch every single little wiggle, so the Portfolio could be inactive for significant stretches of time. With many different indicators (some directly contradicting each other), and many markets, it's hard to know where to focus. The Portfolio is a bottom-line, real-money way of showing where the author interprets risk/reward in the major markets, and any special opportunities.
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