Contrarian Corner
by Robert Ogilvie
RED Option offers weekly musings on various contrarian indicators, trading concepts and risk management.
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Contrarian Corner 10.08.08- Update
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The Contrarian
Robert J. Ogilvie
October 8, 2008
Investors Intelligence Indicator
Normally, peaks in Bullishness that occur above 50% provide the best probability
short entry trades while readings greater than 45% Bears indicate higher probability
long entries. Shoulda, woulda, coulda set the signal last week to Negative but didn’t because
as I saw it the Bearish newsletter writers were making a last ditch effort in
being right as their levels peaked above 45%. The signal was only moved to a Neutral bias instead of Negative because the
Spread between the Bulls and Bears declined from a relative peak in the Spread
rather than the normal high levels following a huge run up in the markets that
brings peaks in Bullish sentiment.
To recap this weekend’s polls of investment newsletter writers and “advisors”,
the level of Bullish newsletter writers polled by Investor’s Intelligence decreased
to 25.3% from 33.7%. The percentage of Bearish advisors increased further above 45 to 53 from last
week’s 47.2%. The spread between the percent Bullish and the percent Bearish decreased to
minus 27.7 from minus 13.5. I don’t believe there have been levels of sentiment this low. With the spread at these low extremes and bearishness at these highs, I don’t
want to place the signal in a Negative bias and possibly face lagging the proper
direction one week. If the spread ticks upward next week, the signal will return to a positive bias. SIGNAL: NEUTRAL BIAS
Robert J. Ogilvie
CIO & Portfolio Manager
Skybox Trading
skyboxtrading.com
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The author of this newsletter is an independent registered representative of thinkorswim,
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of any type arising out of or in any way connected with your use of the services
of the brokerage company. All published results are hypothetical gross results
without adjustment for trading costs (commissions, fees & slippage).
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