Skip to main content

Are there any bulls left?

Today's AAII (American Association of Individual Investors) bull and bear sentiment index are just another statistics that paint the bleak mood of markets. The Bears were over 70, an all time high level since the survey started 7/87, and the Bulls barely registered at 19, also a muti-year low. The difference between Bulls and Bears, a commonly used contrarian indicator based AAII survey, dropped below -50 (see the bottom panel of the chart), it only happened once in early October, 1990. Is the market bottom finally here? The bull-bear contrarian indicator has worked quite amiable in the past. If all the bulls have thrown in the white towels, we just might be at the bottom NOW.




Labels:

Popular posts from this blog

Negative Swap Spread

One of most intriguing event, which barely got any attention in the market, was that, for the first time in the history, 30 year USD swap spread dropped into negative territory today. The US treasury 30 year bond traded at 4.027% and the same maturity US dollar swap traded at 4.051%, i.e, 30 year swap spread was about -2.4 bps (see attached Bloomberg chart below) . The 30 year swap rate only go back to early 1994 in Bloomberg data base, in the last 14 years, swap curve was always and should traded at discount to the treasury benchmark, "risk-free" bogey. So what is mean for the equity and credit market? Or most importantly, is the swap market trying or pricing the much deep recession or an early signal of Japanese-style deflation market has feared in 2003? Is the US treasury credit quality put into challenges? Or just the abnormally due to temporary market forces? Isn't the market facing the greatest CREDIT crisis we ever face since the Great Depression? Should we expect...
Read more

Updated: Will AAPL be $125-150 by July?

In late March, we saw significant bullish bets on AAPL in option markets. In my post " Will AAPL be $125-150 by July ?", we noticed a huge call spread position (10,000 contract) hit the tape on March 25. AAPL was closed at 106 and change, and has rallied more than 35%, which certainly make the owner of this long bull spread position smile proudly. So how much profit we are looking at right now if the investor exits the position today? At this moment, AAPL July 125 call is traded at about $19.50 and July 150 call around $4.20. Ignoring the transaction cost, each contract is worth about $1,530, so the total position is $15,300,000. Remembering that the initial investment was only about $3,950,000, and so net profit would be $11,350,000. The trade almost triples the initial investment just over two months! Not a small feast considering the limited risk profile.
Read more

MBS spread widen at historical levels

The turmoils at FNM and FRE created great anxieties and opportunities for both equities and debt TRADERS. The newly passed housing rescued packages by the Congress and signed the President essentially changed the "implied" to "explicit" US government backings on both quasi agency's outstanding debts. Their spreads to US treasuries have tightened in last few weeks. However, the most liquid 15 yr and 30 yr fixed MBS from Freddie and Fannie were under great pressures in last few days. Using 10 yr swap rate as benchmark, FNCI (15 yr Fannie MBS TBA) was priced to 5.50% with spread of 78 bps, that was 4 times of historical 10 year average (see the first chart). FNCI was traded at the cheapest level since 1998. The 78 bp spread to the swap was about four sigmas of the mean. FNCL (30 yr Fannie MBS TBA) was also trade at the lowest level that we have not seen in the last decade (second chart). Comparing to other investment alternatives, current fixed MBS prov...
Read more