Simple Stock Model aggregates financial and economic data so that investors can easily form a comprehensive data-based outlook on the market. This is a completely free resource provided by Movement Capital

AAII SURVEY


A weekly sentiment survey has been conducted by the American Association of Individual Investors for decades. The AAII asks participants if they are bullish, neutral, or bearish on stocks over the next six months. Survey results are typically used as contrarian indicators, meaning extreme bullishness is perceived as bearish and vice-versa. There are a number of ways to analyze AAII data, and I choose to use the spread between the percentage of bulls and percentage of bears (as opposed to just looking at bulls or bears in isolation).

Articles: Sentiment Analysis by Ramraika, Is the AAII Sentiment Survey a Contrarian Indicator? by Rotblut
Filter Rule: If the 4-week average of % Bulls – % Bears is greater than 25% (extreme optimism), be out of the market
Notes: Survey results are released each Thursday
Current Reading: -6% (more bears than bulls)
Data Source: AAII

SPY SHARES OUTSTANDING


State Street launched SPY, the ETF that this site runs all of its analysis on, in 1993. State Street started providing shares outstanding data for SPY in 2006. The number of SPY shares outstanding grows or shrinks based on the creation and redemption activity of authorized participants. Basically, when SPY is in hot demand and the number of shares outstanding is rapidly increasing, that’s typically been a sign of excess optimism. Vice-versa for redemption and pessimism.

Articles: Update On A Powerful Measure of Stock Market Sentiment by Steenbarger, ETF Float As A Sentiment Indicator by McClellan
Filter Rule: If the 4-week average of the 3-month change in SPY’s percentage of shares outstanding is greater than or equal to +5%, be out of the market
Notes: State Street doesn’t publish Friday’s shares outstanding data until Monday, so this metric is run off of Thursday’s data
Current Reading: +0.9%
Data Source: State Street Global Advisors

NAAIM EXPOSURE INDEX


The NAAIM Index is similar to the AAII survey. The National Association of Active Investment Managers asks their members each week what their average level of exposure is to the U.S. stock market. High exposure is an indicator of optimism among active money managers.

Filter Rule: If the 4-week average of the NAAIM exposure index is greater than or equal to 75%, be out of the market
Notes: Survey results are released each Thursday
Current Reading: 72%
Data Source: NAAIM

CBOE PUT/CALL RATIO


The Chicago Board Options Exchange (CBOE) reports three different put/call ratios: total, index, and equity. The index ratio calculates the volume of index puts traded relative to index calls. The equity ratio calculates the same ratio but for individual stocks. The total put/call ratio combines both measures. For simplicity, this site sticks to the total put/call ratio to provide the most comprehensive view of options sentiment. A high put/call ratio indicates negative sentiment.

Articles: Use the Put-Call Ratio to Gauge Stock Market Sentiment by Ruffy, Ultimate Guide to the Put/Call Ratio by Mitchell
Filter Rule: If the 4-week average of the CBOE total put/call ratio is less than or equal to 0.90 (indicating optimism), be out of the market
Current Reading: 1.08
Data Source: CBOE

SPOT VIX TREND


Of all the above sentiment measures, the VIX gets the most attention. The VIX is a measure of the S&P’s expected volatility over the next 30 days. It is calculated by measuring the implied volatility of a wide range of S&P 500 index options. Divide the spot VIX by the square root of 12 to get an approximation of the expected range of the S&P over the next 30 days. It should be noted that you can’t trade the spot VIX index. Investors get VIX exposure through VIX futures & options or ETFs/ETNs that own VIX derivatives.

Research: Understanding VIX by Whaley (the developer of the VIX)
Filter Rule: If spot VIX is trading below its 4-week average or if the 4-week average of spot VIX is below 12, be out of the market
Current Reading: Spot VIX is 12.87, above its 4-week average of 12.37, and this 4-week average is above 12.
Data Source: Yahoo! Finance

VIX FUTURES CURVE


The VIX futures curve is made up of prices of individual VIX futures contracts. When the curve is upward sloping from left to right, the curve is said to be in contango. Contango means that market participants expect implied volatility to be higher further out in time. The VIX futures curve is typically in contango. When the curve is downward sloping, the curve is said to be in backwardation. In this scenario, near-term VIX futures are more expensive than long-term futures meaning that investors expect volatility in the short-term to be very high. This occurs when the spot VIX index spikes up and people expect volatility to mean-revert and drop over time.

Articles: The VIX Futures Puzzle by Asensio, Deciphering VIX Futures Term Structure by Liu
Filter Rule: If the second month VIX futures contract is less expensive than the front month contract, meaning this portion of the curve is in backwardation, be out of the market
Current Reading: -1.0% (backwardation)

ISEE CALL/PUT RATIO


The ISEE call/put ratio is very similar to CBOE’s put/call ratio. The two differences are 1) ISEE filters out trades from market makers and 2) only opening long trades are included. These measures are taken to present a clearer picture of how retail options traders are positioned. The higher the ISEE ratio, the more optimistic people are about the market.

Articles: A First Look at the ISEE by Luby, ISEE vs. Dow Jones Industrial Average by ISE Market Data
Filter Rule: If the 4-week average of the total ISEE call/put ratio is greater than 140, be out of the market
Current Reading: 92 (meaning more puts have traded vs. calls)
Data Source: ISEE

SITE INFO

All data on Simple Stock Model is refreshed each weekend. The site has been updated to reflect data as of 4/7/2017



CONTACT ME

If you have any questions about this site or any of the indicators it covers, send me an e-mail at adam@movement.capital

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