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The Sentimeter: 6.16.13

Equity market investor sentiment is now neutral. Three week's ago it was extremely optimistic and just like that with everyone all in, the market struggles. The indicator is unwinding, which is suggestive of lower prices. Unfortunately, prior and recent instances have led to QE3 and QE4 -both interventions having short circuited the sell offs. I believe this is not healthy bull market action, and at some point, these distortions will be corrected.

See the Equity Market Investor Sentimeter below, which is our most comprehensive sentiment indicator. This indicator is constructed from 10 different data series including opinion data (i.e., how do you feel about the market?) as well as money flow data (i.e., where is the money going?). This is the current state of equity market investor sentiment.

Investors continue to put a great deal of credence into the notion that the Federal Reserve has backstopped the market. Three week's ago we had parabolic readings in the indicators and this would suggest that this belief is strong. We shall see what Ben Bernanke has in store for the markets. Why Bernanke certainly isn't relevant one can certainly question how much relevance his policies actually have. The last two recessions coincided with significant loosening of the monetary reigns yet the markets (i.e., SP500) dropped about 35% in the 2001 recession and 55% in the 2008 recession. The fall in the indicator from last week's "optimistic" reading to this week's "neutral" suggests that investors are losing their patience with the man behind the curtain.

The Sentimenter - Neutral Sentiment


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