I have definitely beaten the sentiment topic to death.
And there is nothing new to add to the numerous posts in recent weeks on this topic. The sentiment picture remains consistent with a market top. The market swoon in April and May did not produce a great deal of bearish investor sentiment even though the SP500 dropped about 10%. Thus the ensuing bounce should not be all that great. Hopes of QE, bailouts, and central banker intervention were prevalent as prices moved lower, and investors have been rewarded as prices are back above the "all important" 200 day moving average. Beyond that we should be closer to the end as opposed to being on the launching pad for a new bull market.
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) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. This indicator is neutral.
Figure 1. "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 was Neutral last week as insider trading volume was seasonally low. Most insiders continue to be prohibited from transacting purchases or sales until after their respect company's Q2'12 earnings announcement. As such, volume will remain light for another two to three weeks."
Figure 2. 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 65.73%. Values less than 50% are associated with market bottoms. Values greater than 58% are associated with market tops. It should be noted that the market topped out in 2011 with this indicator between 70% and 71%.
Figure 3. Rydex Total Bull v. Total Bear/ weekly
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