Contrary Indicators 2000 – 2003 Bear

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If you have any questions on the indicators (or anything for that matter), you can send email here. You can also request my twice weekly market commentary, “The Big Picture” by sending a request here; Please specify PDF or Word Doc.

I’ve been interested in Contrary Indicators ever since I wrote a couple of articles about the subject for TheStreet.com back in late 2000, early 2001: Contrary Indicators Tip Off Discerning Investors in Year 2000, and Even More Contrary Indicators.

Over the course of the past year, I have made use of a variety of Contrary Indicators (CI). Whenever I reference these, I always seem to get interesting feedback; There is a fair degree of curiousity and intrigue regarding these market signals.

In response to the strong demand for more information on the subject matter, I decided to put together in one place, a full review of all the CIs I’ve refered to over the course of a year. I put these together for a three part series of indicators for the Stock Trader’s Almanac; They ran in June, July and August of this year.

BTW, the almanac is run by a Jeff Hirsch, who is a terrific guy. It was a pleasure working with them, and if you have never seen their diary, you should take at it here.

Because of the size of this report (about 30 pages) and the amount of graphics (about half the body is charts, graphics, and other illustrations), we were unable to email these out.

ABSTRACT: Contrary Indicators of the 2000 – 2003 Bear Market
This paper reviews the signals known as “contrary indicators” produced during the Bear market of 2000–2003. Using both quantitative data and qualitative events, we assess a variety of different indicators. We have determined that many of these were of enormous value to traders and investors.

We attempt to answer the most frequently asked questions about Contrary Indicators: What are they? How do they work? What different kinds of indicators are there?

Finally, we review many individual signals generated over the past 3 years. These include both internal quantitative market signals, and other signals, which, strictly speaking, are from external to the market. These related indicators are more societal in nature, and are “once removed” from the time, price and volume actions of options and equities.

External signals
1) Sentiment Surveys: AAII Bull/Bear; II Newsletter
2) Pimco Total Return Bond Fund surpasses Vanguard S&P500 fund to become the largest mutual fund (October 2002)
3) Individual Short Speculators surpass Commercial Short Traders
4) The Magazine cover indicator
5) Consumer Confidence reaches multi year low
6) Equity fund flows
7) Morningstar recognizes a new fund category: The Bear Funds
8) Financial Media Closings
9) Congress investigates Hedge Funds and Short Selling
10) Death of the IPO market

Internal signals
1) Put/Call Ratio (10 day moving average)
2) VIX
3) Percentage of NYSE stocks above their 40 day moving average:
4) ARMS index
5) Net New Highs (high/low index)
6) A/D line
7) 9-1 volume days
8) +/- 20% from 200-day moving average
9) DJIA/Nasdaq ratio
10) Smart Money Index

The full report itself, in both PDF and DOC flavors, are below.

To download file, right mouse button click over one of the following links below, and select: “Save Target As” (Apple users, hold the Apple Key and click the following):

Download PDF file
Download Word file