Thursday, October 18, 2007

Finding the Sentiment Themes

In the last three trading sessions, yields on the 10-yr Treasury note have plunged from over 4.7% to 4.5%. At the same time, the Yen has soared from 8550 to 8700. Meanwhile, the S&P 500 Index has fallen about 2%, from 1575 to 1545.

Readers will recognize the risk aversion themes and high intercorrelation among markets that we saw during August. Note also the resumed weakness in financial shares over that time, with $BKX down over 4%.

Are traders and investors buying risky assets or fleeing them? That has been the key sentiment question for short-term traders. When money flows into Treasury notes and out of financial stocks, large traders and investors, it would seem, are playing for safety. That's an indicator worth following.


Last Hour of Trading as a Sentiment Measure