JP via RSS
For the Love of Money Is the Root of All Evil
Extreme greed measured by the most calls often presages downfall and often marks market turning points. Extreme fear measure by the most puts often presages unbelievable market performance.
Highly leveraged derivatives are destructive enough, as we saw with Credit Default Swaps, Crude, Dollar carry trades, Gold and Silver leasing, SubPrime Mortgages. They led to the first AIG Wall Street City of London Financial Institution defaults subsequently rescued by taxpayers and accommodative central banks spitting compounding electronic IOUs backed by Treasuries into the wind.
The thinning patience of voters in the 2010 Election Year suggests we may not soon see additional government bailouts of losers allegedly too big to fail. At some point, Uncle Sam and Taxpayers are at serious risk.
Highly leveraged time-limited wasting assets called options and day trading are probably the easiest way to personal bankruptcy for most. At least Vegas Roulette Wheel gambler odds approach 47.37 % except for the first five numbers, 0-00-1-2-3, which have a 7.80% house edge.
http://wizardofodds.com/roulette
Most of us do not bet against the sun coming up.
When we hear the siren call of option touts screeching extreme call or put buying, or complicated commission combination spreads, straddles, straps or strips, we run the other way to conserve capital. We freely admit what worked in rehearsal on paper rarely works so well in real life.
If we have enough experience, money management discipline, patience and reserves, we might profit fading option buyer trades when they reach extremes.
Thus the www.ISE.com International Securities Exchange ISEE Sentiment Index, along with other extreme sentiment (feeling) indicators like the percentage of bulls and bears and volume peaks and lows, provide some invaluable market signals.
http://www.ise.com/WebForm/viewPage.aspx?categoryId=126
