Brokers Are More Pessimistic; TIM Long Short Index Falls 28 Percent

As equity markets continued to fall, institutional brokers are more pessimistic about stocks as compared to the prior week, according to data compiled from the Trade Ideas Monitor (TIM).

Through the five trading days ended March 5 — when the FTSE and S&P indexes declined 9.9 percent and 9.3 percent respectively — new short ideas, as a percentage of all ideas brokers sent to investment managers in real time through the TIM, increased to 42 percent from 34 percent on Feb. 26, 2009. For February 2009, short ideas were 42 percent and in March to date, short ideas are 38 percent and year-to-date, they are 44 percent. Trade ideas entered into TIM reflect what brokers believe will happen to stock over the next one to three weeks, on average.

The TIM Long Short Index decreased 28 percent to 1.38 from 1.92 on Feb. 26, which is regarded as a negative sign, according to TIM. The index measures the total number of long ideas compared to the total number of short ideas brokers sent to clients. The lower the index, the more bearish the brokers. At 1.5, brokers are entering two longs for every short, and at 0.5, two shorts for very long. Month-to-date for March 2009, the index is 1.78 and year-to-date is 1.36.

More than 4,300 equity sales people at 300-plus institutional brokerage firms enter the trade ideas, which are sent to more than 100 hedge funds, quant funds and traditional investment managers.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio