Figure 1 shows a weekly chart of the SP500 with the composite sentiment indicator.
This indicator is constructed from 10 different variables that assess investor
sentiment and behavior. It utilizes opinion data (i.e., Investors Intelligence)
as well as asset data and money flows (i.e., Rydex and insider buying).
Figure 1. Composite Sentiment Index
After hitting extremes in mid- August and again in mid-September, the indicator
is unwinding and is currently in a more neutral position.
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