Market Sentiment

csw2002

Thanks to continued effort from Moreliver in shoring up this forum with his MEI works, I have come to contribute as well. I will post my daily sentiment model based smart money and dumb money. It is a bit different from the original thread I posted back in 2015 as this model relies more on option data than inverse fund flows. I may still comment occasionally if I see something interesting. For example, right now, the dumb short fund has as much shorts outstanding as back at the end of January this year. Almost 900 million dollars have flown out from this short fund. In this old days, this would have resulted in a big sell-off by now. However, given the blow-off type of actions we are seeing, not much is happening. It may be that we need to see short fund shares outstanding falling back to the beginning of Jan 2016 level to see any sizeable correction occurring.

csw2002

I have stacked 7 charts together. The top 4 charts measure dumb money activity and bottom 3 measures smart money activity. Vertical axes are inverted if necessary. Essentially, when the oscillator gets to the top of the recent range, it is a sell and if it gets to the bottom of the range, it's a buy. Hence, we are on a strong sell based on dumb money activity (as dumb money is too bullish) and a strong buy on smart money activity. The best signals come when we have alignment of dumb money and smart money (i.e., smart money on buy and dumb money on buy, or smart money on sell and dumb money on sell). Right now, smart money is on a strong buy and dumb money is on a strong sell - and hence I don't have a lean which way it is going to go right now. The most recent case with the same set up is mid to mid to late Aug 2016.

源济

谢谢分享！

csw2002

I forgot to add that dumb money has been most bullish (i.e., bearish for equity) since mid July and mid May (for 2 measures of dumb money).

林中行

谢谢版主分享！

ContxTrd

谢谢版主

moreliver

Would you please explain the meaning of CPC, CPCE, OEX and OI in your charts?  Thanks.

hifive

vanbj

lilili

when smart money figur is at low level, can we take it as  that smart money is high on short side? then it will be in aline with  dum money and draw a same conclusion that market is at sell level

georgeyn

wnd4

wreckbeach

辛苦了！

cutloss-runp

thanks, lao W....

csw2002

One post to answer all the questions:
CPC = CBOE Total Put Call Ratio - dumb money - usually a fade at extremes
CPCE = CBOE Equity Only Put Call Ratio - dumb money - usually a fade at extremes
OEX = SP100 Put Call Ratio - smart money - not to be faded normally
OI = Open Interest

The chart is very high resolution. If you can't see the chart clearly, zoom in using your mouse wheel or download the original.

Each chart has been configured to show a sell when the oscillator is high and a buy when oscillator is at low. You can also view the value of individual metric by looking at the left vertical axis (and right vertical axis is used for SPY). The dumb money charts have their left vertical axes inverted so that extreme optimism is represented by oscillators moving up and extreme pessimism is represented by oscillators moving lower.

csw2002

Market Sentiment for Dec 12: Dumb money continues to be exuberant and smart money has turned around slightly and is on sell. However, given how much they bought last week, it hasn't turned the signal around enough to a swing sell based on smart money PCR yet.

csw2002

Market Sentiment for Dec 13: dumb money continues to be extremely exuberant. However, smart money is also buying lots of calls vs puts as well.

As I said in one of my early post, the best signals are those that smart money and dumb money signals are pointing in the same direction. We don't have it here (and we did have it at may top, june top, june bottom (brexit low) and nov bottom). My guess is that we need to wait a bit longer before shorting the equity market.

moreliver

csw2002 发表于 2016-12-14 12:08 AM
Market Sentiment for Dec 13: dumb money continues to be extremely exuberant. However, smart money is ...

Thanks. "We need to wait a bit longer before shorting the equity market".

csw2002

Market Sentiment for Dec 14: despite today's drop, dumb money is still in the exuberant zone but surprisingly smart money continues to buy as well. On an open only basis, dumb money did buy a lot more puts vs yesterday (Dec 13) triggering a day trade buy signal for Dec 15. However, it's highly doubtful bulls or bears would be able to go far from here. I think we need to set up a new trading range from which the break (downwards being my expectation) would provide good swing trade short opportunities.

moreliver

csw2002 发表于 2016-12-15 05:21 AM
Market Sentiment for Dec 14: despite today's drop, dumb money is still in the exuberant zone but sur ...

"dumb money is still in the exuberant zone",  does it mean dumb money is heavy selling?