"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 10 mins Why Smart Money Is Selling Off Right Before The Bell
  • 2 hours Tech Giants Rally Ahead Of Earnings Reports
  • 18 hours Global Debt Hits 225% Of GDP
  • 19 hours The World’s First Trillionaire Will Be A Space Miner
  • 20 hours How Student Debt Could Cause The Next Real Estate Crisis
  • 21 hours This $550 Billion Industry Is Betting On Bitcoin
  • 22 hours One Commodity Set To Soar On Russian Sanctions
  • 1 day China’s New Car-Market Rules
  • 1 day Oligarch Risk: The New Red Flag For Investors
  • 2 days Five Things To Consider Before Investing In An IPO
  • 2 days Investors Bullish As Earnings Season Kicks Off
  • 2 days Nearly One-Third Of U.S. Lottery Winners Declare Bankruptcy
  • 2 days Is Facebook Still A Buy?
  • 2 days Will Blockchain Stocks Ever Bounce Back?
  • 2 days Geopolitical Tensions Fail To Boost Gold Prices
  • 2 days China's Economy Soars Despite Trade War Fears
  • 2 days The Biggest Threat To The Economy
  • 3 days What Does A Billionaire's Bucket List Look Like?
  • 3 days Is The Global Economy Growing Or Slowing?
  • 3 days A Sanctions War Could Cripple U.S. Corporations
One Commodity Set To Soar On Russian Sanctions

One Commodity Set To Soar On Russian Sanctions

The recent sanctions on Russia's…

Tech Giants Rally Ahead Of Earnings Reports

Tech Giants Rally Ahead Of Earnings Reports

Earning season has just begun,…

Investor Sentiment: This Time Will Not Be Different

It was touch and go this week, but in the end and as suspected in last week's comments, the "this time is different" scenario will not play out. Prices are expected to head lower as the bullish extremes in sentiment unwind. This should NOT be a bull market top leading to a bear market. Bear markets come about when "buying the dip" fails. In other words, this overbought, over bullish market should correct providing a better risk adjusted buying opportunity in the future. Failure of a bounce to materialize at that point is a harbinger of a bear market. I expect to see a correction leading to a better risk adjusted buying opportunity, and this buying opportunity usually coincides with investors turning too bearish (i.e., bull signal). We are a ways from that point, but we will get there!!

The "Dumb Money" indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio. The "Dumb Money" indicator is very bullish to an extreme degree.

Figure 1. "Dumb Money"/ weekly
Dumb Money Weekly

Figure 2 is a weekly chart of the SP500 with the InsiderScore "entire market" value in the lower panel. From the InsiderScore weekly report: "Market-wide insider sentiment improved to its best level since the week ended August 31, 2010 as the market ran to a 27-month high before quickly giving back some gains. The Russell 2000 was the main sentiment driver and the Energy and Healthcare sectors were the main contributors within that group. Volume remained very light as the majority of insiders are locked-up ahead of their companies' earnings announcements, but we did see an uptick in buying in the wake of the market's peak and giveback early in the week. While not a strong signal, insiders nonetheless sent something other than a sell signal for the first time in 20 weeks."

Figure 2. InsiderScore "Entire Market" Value/ weekly
InsiderScore Entire Market Value Weekly

Figure 3 is a weekly chart of the SP500. The indicator in the lower panel measures all the assets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall.

Currently, the value of the indicator is 69.62%, and this indicator has now turned down two consecutive weeks from its highest level in 10 years. Values less than 50% are associated with market bottoms. Values greater than 58% are associated with market tops.

Figure 3. Rydex Total Bull v. Total Bear/ weekly
Rydex Total Bull v. Total Bear Weekly

 


Improve your market timing with Premium Content from TheTechnicalTake.

The Premium Content service is the best $104 you will ever spend on market research. The daily report is meant to keep you on the right side of the market and improve your market timing. That's 40 cents a day!

Even in this confusing market environment, The Premium Content service has been useful in identifying trading opportunities. The indicators have functioned as expected!!!

To learn more about this service click here: Premium Content

 

Back to homepage

Leave a comment

Leave a comment