UoM Consumer Sentiment: Crash?

Discussion in 'Trading' started by Babak, Sep 18, 2005.

  1. Babak


    Look at this:


    And then check out the detailed data here.

    Notice that when the sentiment surve falls below a significant congestion area (late 90's and late 80s) the market doesn't last much before falling significantly.

    The only exception I can find is the dip in Oct 98 (to below 100) which was actually a great signal for a bottom!

    I'm still playing around with the numbers/charts but what do you guys think? does it have any value as a variable?


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  2. good stuff.

  3. Babak


    Its a bit fuzzy still but I think the data seems to suggest that a spike down in sentiment is a sign of capitulation in the market. Recent examples are Mar 2003 at 77.6 (second lowest to the recent readings) and the Oct 2002 low with 80.6

    The puzzling thing is why the media keeps harping on that it is now "lower than what it was after Sept 11th". Somehow they miss that it was lower in both 2002 and 2003.


    Ofcourse, this is just hindsight. If the mkt continues lower, I suspect so will the sentiment numbers. But all in all, this is probably a significant low in both the sentiment numbers and in the mkt. We'll see.

    Also look at this:

  4. the key is not to know if we are going to crash but where to enter where risk is defined and won't be violated.

    Wouldn't you say so yourself?
  5. My analysis of the UofM sentiment is when the value is low as it is now (pre Sept = 76.9%) the market is in a buy region. When high as in 1999-2000 it is a sell.

    Notice that we are now at a level that was last seen in 2003...a good buy point. Also notice early 90's...another good buying time.

    Also in the early 1980's another long term good buy region.

    ie low values represent investor sentiment is negative and probably market valuations are low and a good buy. In contrast when the confidence of the consumer is high and they are fully loaded up on stocks that is a good time to sell yours to them.
  6. Also I never give the market much chance of any downside when the Bears are short the market 5 times more than the Bulls in the Rydex funds. Need to wait for a meaningful rally and a dumping of the short funds and much higher level in the Rydex ratio before the market falls.
  7. Babak


    rts, thanks. That's pretty much the conclusion that I came to as well. Of course, its hard to know that the reading will be it or whether lower readings will follow but it has a nice way of creating a backdrop, or macro view of the market.

    Thanks for the Rydex stuff as well. I see that Schaeffer has changed his site (they used to have much more Rydex data in graph form - extendable to multi-years).
  8. This market is fucking bullshit. It cannot go down no matter what. You'd think the annihilation of a major U.S. city would have some dent but not at all, stocks still trading in the same range that they were 6 months ago.

    Bullshit Bullshit Bullshit.

    Don't even get me started on ForEx and the magic U.S. dollar. The only currency in the history of the world which strengthens as the economy weakens.

    or erroneous CPI/PPI inflation numbers, who are they tring to fool? Any kid above 6 years old can tell their weekly allowance no longer goes as far as it did one year ago.

    Finally, America loves communist! If not for China, this country would be in the shitter. Those stupid hacks keep buying bonds like there is no tomorrow. They're not stopping no matter what, not even an inverted yield curve or high inflation The inefficenes of Communism is fundig the American way of life as China gives us their rapidly growing wealth via treasury purchases. Ironic!

    Maybe they don't realize money grows on trees... for the federal reserve anyway.
  9. mhashe


    Astute observations. I'm very bearish longer term in stocks, but bullish short-term (next couple months). Simply because I think the street will take stocks higher so they can minimize their long exposure and rotate out to safety. Too many factors starting to buffet the economy at the macro level, I would'nt be suprised if we sell off hard sometime after first Qtr of '06.
  10. Me too; I'm expecting a replay of the start of '05.
    #10     Sep 18, 2005