It is the end of the month. It is the end of the quarter. It is the week
before a holiday. This gives the market a slight upward bias for the coming
week. In the intermediate term, the "Dumb Money" indicator remains bullish
to an extreme degree, and typically this is a bearish signal. This is a real
head wind for the market. Since the "dumb money" turned bullish 8 weeks ago,
the S&P500 has lost a little more than 1%, the NASDAQ 100 is up about
6% and the Russell 2000 is flat. For the week ahead, I suspect the shorter
term bullish bias and the longer term bearish bias will make the markets
choppy and range bound. It is the summer doldrums!
The "Dumb Money" indicator is shown in figure 1. The "Dumb Money" indicator
looks for extremes in the data from 4 different groups of investors who historically
have been wrong on the market: 1) Investor Intelligence; 2) Market Vane; 3)
American Association of Individual Investors; and 4) the put call ratio.
Figure 1. "Dumb Money" Indicator/ weekly
The "Smart Money" indicator is shown in figure 2. The "smart money" indicator
is a composite of the following data: 1) public to specialist short ratio;
2) specialist short to total short ratio; 3) SP100 option traders. The "smart
money" is neutral.
Disclaimer: Guy M. Lerner is the editor and founder
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is based upon information thought to be reliable and is not meant as investment
advice. Under no circumstances does the information in his columns represent
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