Dumb money vs. smart money

csw2002

Today saw another 55 millions of new inflow into SH fund. Total shares outstanding is at a record high of 92,275,000 shares. We also had a NR7 day and low volume pullback. Smart money OEX PCR at the close is neutral. This makes think that we should rally from here. I have no idea how high we could go but it should be substantial (my target is at least SPX 2040 to retest the breakdown).

The fly in the ointment is that there are also significant inflows into SDS and SPXU over the last few days and I have found these double and triple return ETFs to be the smart money. While Rydex ratio and small spec short interest are all screaming extremes (which are contrarian bullish), we are not at the same level as at Oct 2011 and Mar 2009 (for example, Rydex ratio was at 2 whereas we are at 0.5). If this turns out to be a major bottom like Oct 2011 and Mar 2009, we should expect another 2 to 3 years of bull market (accompanied by short term pain that should see retests of the lows if not a lower low). I personally find it hard to believe the current valuation can sustain the bull market for another few years. My preferred scenario is a rally to either test the breakdown at 2040 or more preferably a marginal all time high (either by Dow or SP500) a la Aug to Oct 2007 move (which should hopefully remove the extreme bearishness in the general public and dumb money) before bears re-assert control. Put simply, I can't see how we can head into a bear market with the public on board.

wreckbeach

星期四下午有可能轧空。因为本周五是四重魔力日，SPY分红。

cw8888

superxy

周四怎么走？应该很激烈。。。

acoust

我是谁

csw2002

We have broken out of the pennant decisively and now the ball is bull's court. Having said that, FOMC decision (and market's reaction which I couldn't possibly foresee) could still make the break a false move (recall the break up back the middle of Aug which turned out to be a false move). Dumb money short SH added another 10 million dollars. While the amount is immaterial, it seems that the dumb money is fighting the move-up and it is a good sign for bulls. On the other hand, OEX PCR closed today at 2 to 1 again, which is bearish, at least for tomorrow. ISEE (which historically has always been the dumb money - but has been the smart money since late July this year) is back above 100 for the first time in a long time, indicating finally some bullishness on the part of retail crowd. My inclination is that we should see some weakness early in tomorrow's session. If I am right that the bull should take charge eventually, then this pullback should be limited in both volume and price, and price should recover by the end of the day. If tomorrow turns out to be a strong trend down day, then bear is probably back in control again and we should see a break lower on the pennant and an eventual test of the low, if not lower.

xiaoxiao08

csw2002 发表于 2015-9-15 08:21 PM
We have broken out of the pennant decisively and now the ball is bull's court. Having said that, FOM ...

Thanks for sharing.

shibainu

我是谁

csw2002

Another substantial Up Day. I must admit I am surprised by the strength. The morning dip is tiny and very fast, before the bulls bought the whole thing back up. I am not even sure that it qualifies as a dip at all. For tomorrow, anything can happen. OEX PCR continues to stay on the bear side (closing above 2) and ISEE shot back below 100. That means we are seeing a lot of hedging by both smart and dumb money. SH hasn't updated and I will provide an update when and if it does. Moreliver, are you able to update your indicator chart to see if the market has broken out of the ceiling for your indicators (as SPX has already done so).

Hence for the very short term (i.e., tomorrow), it is a bit cloudy with the smart money again positioned short and extreme volatility expected after FOMC decision. Intermediate term, I am still pretty bullish, expecting 2040 at a minimum, and hoping for an all time high to clear out all the bearishness in the dumb money.

csw2002

No additional shorting in SH - though no covering either. My thesis is still that dumb money is fighting this move back up. On the other hand, SDS saw some additional inflows but SPXU has remained flat.

csw2002

Wow, what a day. I think both late bulls and early bears have had their stops taken. As at the close, oex pcr is at a very bearish 3.11 and it was as high as 20 intraday before the fomc decision at 2pm. Dumb money sh saw no further inflow but no redemption either. On the other hand, sds saw substantial redemption but spxu remainded pat for the last few days. Overall, my thesis is still that dumb money short is fighting this uptrend  by not covering or adding. We were short term very overbought and a pullback (not below tuesday's low) is healthy, especially given positive breadth despite the weak close. Tomorrow is historically bullish but next week is the weakest week of the year over the last 25 years. If bear is to reassert control, next week would be the one. Otherwise, bulls should run the show till oct.

csw2002

Oex pcr closed under 2 for friday and hence is neutral for Monday. Sh saw 4.4 million dollar outflow. Sds remained flat. Spxu saw some additional shorting. Hence no short term signal for monday.

csw2002

Final adjusted oex pcr closed on Monday at 1.88 but unadjusted number at close was 3. So I think there is a small amount of bearishness in the number. Isee closed above 100 for the second time since late july. There is no change to SH flow. Given the very high closing tick, I expect some morning weakness but I would be a buyer on such weakness.

lite1067

csw2002 发表于 2015-9-21 10:58 PM
Final adjusted oex pcr closed on Monday at 1.88 but unadjusted number at close was 3. So I think the ...

What is adjusted number on OEX PCR?

I saw OEX PCR closed at 3.23. And SH outstanding reduced to 92.525MM from 92.725MM.

csw2002

lite1067 发表于 2015-9-22 01:08 AM
What is adjusted number on OEX PCR?

I saw OEX PCR closed at 3.23. And SH outstanding reduced  ...

You are looking at the cboe website data. It doesn't include adjustment due to positions entered after 4pm. The drop in SH shares outstanding is from friday not monday.

csw2002

SH is flat today but SPXU and SDS both saw inflows. On the bull's ledger, we have a very bullish OEX close at 0.51 which is the most bullish since the Aug crash. Along with all three ISEE components closing well below 100, I like bull's case. While the market was down a good 20 points on China Flash PMI miss, I think the chances are good that we will see a recovery before the US cash market opens.

csw2002

Final adjusted OEX PCR is 0.79 and it is mild bullish. No change to SH, SDS or SPXU. I am still bullish based on the OEX PCR and bearish ISEE number.

I notice that no one seems to be reading this thread anymore. Please add comment to this message if you are still reading it. Otherwise, I can stop updating it since everyone seems to be already in the wechat group where I repeat all the data anyway.

葡萄柚

Thanks