Short-Term Traders Swing Toward Bullish Sentiment at 2009 Las Vegas Traders Expo

11/19/2009 4:22 pm EST

Focus: STRATEGIES

Tim Bourquin

Co-Founder, The Traders Expo and The Futures & Forex Expo

While online traders typically hold for shorter time frames than traditional investors, forecasting the direction of the markets is an important component of any overall trading strategy. Because markets tend to be driven as much by participant sentiment as technical analysis and news, MoneyShow.com has been gauging trader and investor sentiment for several years at each MoneyShow and Traders Expo production.

A survey conducted by Traders Expo, the largest convention for active traders and investors, was compiled to determine trader sentiment about the direction of the markets heading into the final month of the year and beyond. Over the course of several days, traders were asked their opinion about a variety of financial issues, including the overall direction of the stock market through the remainder of 2009, their opinion on the value of oil, gold, and the US dollar, and interest rates and inflation. See the full results here.

Some notable results were:

  • Nearly 50% of traders surveyed are somewhat or very bullish on the prospects of the Standard & Poor’s 500 through the remainder of 2009
  • 50% of traders surveyed felt their most profitable trades would be in stocks or options
  • Nearly 50% of traders surveyed believed the dollar would decrease in value against other currencies, while 32% felt the USD would remain at about the same level
  • 96% of traders stated they believed the Federal Reserve would make no changes to the federal funds rate for the remainder of 2009

The bullish sentiment of the traders surveyed is in stark contrast to the survey conducted one year ago.  In 2008, with the credit crisis in full swing, 43% of traders surveyed felt the S&P 500 would be lower by the end of 2008. That sentiment has obviously changed now that nearly 50% of traders surveyed are “somewhat” or “very” bullish on the market’s overall prospects for the rest of 2009. The more bullish stance by traders is also the result of a recent Fed meeting where the board reiterated their intent to keep rates low and at their current levels for the near term.

However, the results also seem to show that traders are ready to profit from either market direction. The trend of traders becoming more comfortable making short trades (trades that profit from an anticipated move down in any market) continues to increase, with short-term traders seeming more willing to trade the downside of the markets than in past surveys.  In 2008, 26% of traders stated that they would execute trading strategies that include up to 25% of their total trades based on a belief that a security will lower in value. This year, in 2009, that percentage has increased to nearly 40%.

Not surprisingly, the percentage of traders surveyed who said their most profitable trades would be in stocks also increased from 21% in 2008 to nearly 29% in 2009—in line with the more bullish sentiment results on the equities market this year.

Finally, with the US dollar seeing significant declines in 2009, sentiment has shifted significantly from bullish to bearish from the previous year.  In 2008, 50% of the traders surveyed expected a rise in the US dollar.  A year later, only 19% of respondents felt the dollar would rise in value during the remaining days of 2009.

By Tim Bourquin, co-founder of The Traders Expo

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