A few weeks back, I kicked off the Intelligent Investor Series as part of my weekly commentaries. Th...
NYOT09 Sentiment Indicator Survey
02/18/2009 1:03 pm EST
The tenth annual New York Traders Expo takes place this weekend at the Marriott Marquis Hotel in Times Square. The convention for active traders draws thousands of active, short-term traders from around the country and a large contingent of international attendees as well. As has become tradition, The Traders Expo conducted its survey of trader sentiment to gauge traders’ thoughts on the future direction of the market and their overall enthusiasm for trading specific markets.
When asked about the direction of the Standard & Poor’s 500 average between now and the end of 2009, traders were nearly evenly split between bullish and bearish sentiment. Uncertainty in the markets creates volatility, and with no clear direction, it signals that there will certainly be higher market volatility in the coming months. This may also be a function of uncertainty about how the stimulus bill will affect the broader markets through the remainder of the year. Traders have seen the demise of some of Wall Street’s legendary players in the past six months—enough to make even veteran traders nervous about where the financial markets are headed.
1. Between now and December 31, 2009, I think the Standard & Poor's 500 average will:
Short-term traders have historically favored long positions when trading, however, that old adage may be changing. As traders adjust their strategies to a bear market, more active investors seem to be shorting stocks and other securities to make gains. Nearly 29% of those surveyed stated that up to 50% of their trades would be short sales. Only 17.6% stated that they would not be doing any short selling through the rest of the year. As traders realize they need to have the skills to make money in any market environment, the percentage of short trading is bound to increase, just as it has over the last 18 months of Traders Expo surveys.
2. From now until December 31, 2009, I estimate the percentage of my trades that will be SHORT sales will be:
While equities traders are less concerned with domestic interest rate movement than their currency-trading counterparts, monitoring the Federal Reserve has become popular over the past few years with even the most ardent daytraders. When asked their thoughts on what the Federal Reserve may do with key interest rates, most acknowledged that there is little room left to lower rates. 63% thought there would be no change for the remainder of 2009. However, 22% stated there would be one or two increases this year, most likely an attempt to curb inflation that many traders feel is certain to come.
3. For the remainder of 2009, I expect the Federal Reserve will:
Choosing individual trades carefully has become a critical component of trading success in volatile markets. When asked if they will be trading more, less, or the same this year than in 2008, 40% stated they will make more trades this year than they did last year. This could be a function of more “buy and hold” investors taking greater control of their own portfolios and making their own choices. As retirement accounts and long-term investments have been hammered, short-term trading has surfaced as a viable alternative, at least for a small portion of overall portfolios. The continuing volatility in the coming months will, no doubt, offer an ideal trading environment for those who are looking for quick movements intraday. The traders surveyed appear ready for this and will take advantage of it with more frequent trades.
4. For the remainder of 2009, in terms of number of trades, I expect that I will:
For retail traders, day and swing trading used to be almost exclusively the realm of stock traders. No longer. Traders now have a dizzying array of securities to trade, and when asked where they felt their most profitable trades will be placed this year, respondents indicated a variety of securities. Foreign currency and ETFs (17% and 12%, respectively) continue to gain popularity, while options (23%) and stocks (23%) will make up nearly half of all profitable trades, according to traders.
5. For the remainder of 2009, I expect that my most profitable trades will be in:
Following the daily and weekly gyrations of the US dollar against other currencies has become as routine as checking the Dow Jones Industrial Average throughout the trading day. With the explosion of retail foreign currency trading, eyes on the US dollar have become commonplace. 35% of traders surveyed felt the dollar would fall in value moderately over the course of 2009. Actually, I’m surprised this number isn’t even higher based on the fact that billions of dollars are about to be borrowed for the stimulus bill that was recently passed. The United States debt has reached staggering proportions, yet 29% of traders believe the US dollar will actually rise in value. Regardless of the true outcome, more and more traders will be taking positions on both sides to profit from the coming moves as the retail forex train continues to gain momentum.
6. For the remainder of 2009, I expect the U.S. Dollar, in relation to other currencies to:
Finally, The Traders Expo asked traders a general and simple question about the overall US economy: Will it improve, worsen, or remain about the same? 45% of respondents felt the economy still has downside room in 2009. Traders normally don’t have an opinion on such macroeconomic issues, however, this is a critical time for the markets and traders realize that outside forces, such as the stimulus bill, could have a dramatic affect on the volatility that short-term traders crave.As the Los Angeles Traders Expo in June draws nearer, it will be fascinating to see if traders begin to sway to the bullish side as they attempt to find a bottom in both the economy and the markets they trade.
7. For the remainder of 2009, I expect the overall economy to:
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