For the fifth week in a row, equity market investor sentiment remains neutral. Over the past 3 weeks, the market erased the losses suffered over the prior 4 weeks and just like that we are at new highs!! Funny thing, the indicators never really unwound. Seven week's ago The Sentimeter was extremely optimistic and just like that with everyone all in, the market struggles. We should have gotten more selling, but buyers are so conditioned to buy the dip knowing that Ben Bernanke has their backs, and as if on cue, Ben answered the bell this week. However, strong markets usually don't bounce too high or go too far when the indicators are neutral. So we are still expecting a range bound, choppy market. The way to make money in such markets is to buy the dips and sell the rips. The SP500 has moved about 7.5% in 13 trading days. That's .57% gain per trading day or 11.5% per trading month or 138% gain trading year. Nothing abnormal here (sic).

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.

Over the past year, sell offs have been met with Federal Reserve intervention -- namely QE3 and QE4. These interventions short circuited the sell offs. I believe this is not healthy bull market action, and at some point, these distortions will be corrected. At this point, it is difficult to know if the Fed has something else in its bag of tricks and what will it take to use it, but rest assured they will do whatever they can to prop up the markets. Last week, all it took was jawboning by Ben Bernanke. A neutral reading in the indicator implies that there is little predictive edge to the market action.

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