A Comprehensive Look At Investor Sentiment

By: Guy Lerner | Thu, Mar 4, 2010
Print Email

Figure 1 is a weekly chart of the S&P500. The indicator in the lower panel is a composite of the 4 sentiment measures posted to this website every weekend: the "dumb money", the "smart money", company insiders, and the Rydex asset data. It takes 13 data inputs to make this one indicator!

When the indicator is at or below the red line, it suggests a combination of overly optimistic investors or pessimism amongst the "smart money". Under these conditions, equities will continue to grind higher, at best, or put in an intermediate term market top. The red dots over the price bars are those times when the indicator was at or below the red line on the chart. Figure 1 extends from November, 2006 to the present.

Figure 1. S&P500/ Investor Sentiment Composite

Figure 2 is the time period from 2004 to November, 2006.

Figure 2. S&P500/ Investor Sentiment Composite

In summary, this comprehensive look at investor sentiment suggests the obvious: the best gains are behind us. Furthermore, in all but one occurrence since 2004, you were able to buy the S&P500 at a lower price within 20 weeks of the initial signal.

If you would like to receive daily sentiment updates, then subscribe to our Premium Content. We charge a nominal fee for this daily report that contains 6 unique sentiment graphs, commentary and trading strategies.

 


 

Guy Lerner

Author: Guy Lerner

Guy M. Lerner
http://thetechnicaltakedotcom.blogspot.com/

Disclaimer: Guy M. Lerner is the editor and founder of The Technical Take blog. His commentary on the financial markets 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 a recommendation to buy or sell stocks. Lerner may on occasion hold positions in the securities mentioned in his columns and on the Web site; in all instances, all positions are fully disclosed at http://thetechnicaltakedotcom.blogspot.com/. However, their positions may change at anytime. For more information on any of the above, please review The Technical Take's full Terms of Use and Privacy Policy (link below). While Lerner cannot provide investment advice or recommendations, he invites you to send your comments to: guy@thetechnicaltake.com.

Copyright Notice: Except for making one printed copy of this newsletter or any other materials, files or documents available from, accessible through or published by TheTechnicalTake, LLC for your personal use (or downloading for the same limited purpose), none of these said materials, files and/or documents may be reproduced, republished, rebroadcast or otherwise re-distributed without the prior expressed written permission of Guy M. Lerner.

Copyright © 2004-2012 Guy Lerner

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com