“THIS IS ROMANIA, SENTIMENT DOES NOT WORK HERE”

For the last 5 years, I have heard market participants telling me Romanian markets are atypical and what works in developed markets can’t work here. On one side market participants believe this and on the other side the majority watches DOW JONES like there was no tomorrow. We humans are strange beings. “Technical Analysis can not work here, these markets are illiquid”. “Fundamentals and insider information works”. “Sentiment analysis is not useful”.
This is not just with Romanian capital market players even globally sentiment surveys are underused. The recent newsletter from Integrity Research, New York asked this question.  Does your firm use surveys as part of its investment process?  YES _____  / NO _____
The newsletter adds “we recently asked 86 analysts and directors of research from buy-side and sell-side firms in North America, Europe, and Asia. Well over one third of participants in our study (38%) revealed that they use surveys, while the majority (62%) revealed that they do not use surveys as part of their investment research process. The responses we obtained from both, users and non-users of survey work, uncovered interesting trends and opportunities presented by this research tool. There are benefits of using surveys as an investment research tool. It provides insight on how analysts can take full advantage of this tool by properly designing, implementing, and/or commissioning survey work.”
Market perceptions are changing slowly but surely. We have tried to do objective work in changing market perception. It’s an attempt to create a market for alternative research, where none existed. RSR was an attempt to showcase how sentiment surveys can be more valuable        than all the information that you can process. How a market sentiment summary can’t be ignored.
This is what we said in RSR on 06 AUG. “About the markets ahead for AUG. RSR has shown some interesting observations yet again. Most of the readings are back in the    bullish zone nearing average 70 for both the sentiment groups and time frames under study. What does this mean. This means sentiment has shifted into positive mode after two months of negative readings. However, the drifting that we explained (THE SENTIMENT DRIFT) has never given a reversal in a month. That means after we see sentiment readings turn positive after negativity, it remains positive for atleast two months. This is a generalization but considering markets and humans drift, it is tough not to give market some more space for some further upside before the real crack appears. Whether it is mid August or early September, it is tough to say now, but high sentiment readings should be followed by intermediate negativity not positivity.”
The anticipated Early September breakdown happened. Markets are back to where we left them. How far down we go is tough to say now but a few weeks of negativity can do better for the nascent bull market than anything else. Bullish readings have turned from above 70 to sub 70 in many cases. There is much space for readings to fall. The confidence index is also retesting parity levels. Overall, the negative case should strengthen in SEP 2009. OCT is known for equity lows. This is when we are expecting the 12-15 month bull run to start and EURRON to start its multi month strengthening and recession to finally be said good bye for till end of 2010. During a recent conversation a friend admitted that he was not smart enough to see the rise from MAR lows and caught it pretty late. My answer to him was that forecasting smartness is linked to the forecasting tool one uses not otherwise. Our Romanian Sentiment Review delivered in March. Let’s see what happens next.
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A SENTIMENT INDEX reading can assist to measure these extremities in mood and potential market turns. Survey respondents will not only benefit from the interpretation and indicator readings but also will be invited for regular training seminars on sentiment indicators and provided relevant literature. Orpheus CAPITALS and Prognosis.ro are two independent research companies publishing the ROMANIAN SENTIMENT REVIEW. RSR is a sentiment index based on the survey of market players. The respondents are queried on a host of areas including time frame of expectations, bullish and bearish bias and sectoral preferences. The data is then analysed to create various sentiment indices. The readings of the various indices explains the market sentiment and market direction. We also furnish the sentiment data on a periodical basis to financial institutions, fund managers and brokers for further research and investment.
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