Friday Market Sentiment
Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |
The blogger market-sentiment is the highest I have ever seen it. Apparently they are believers that the Fed liquidity is going to make its way into the equities. I assume this means that these bullish bloggers already have most of their money, and their reader's money, invested in the market. So this works against stocks unfortunately. However, the individuals are still very bearish which works in favor of stocks. The newsletter writers are the most important and they are close to the below-45%, bearish level required for a low-risk entry point into the market, but not quite there yet. Bottomline, bullish sentiment as measured by the surveys is higher then it usually is when the market is about to kick off a sustained uptrend. This means that risk is higher than usual, and the new upcycle may not last as long as usual.
The chart above is another look at the newsletter writer's sentiment showing the broad perspective. It shows that sentiment has only moved about halfway to the extreme low-risk entry-point level shown during the best opportunities in the past.
Above is a great chart from a new site IndexIndicators.com that shows sentiment measured by the 20-day ma of the total put/call ratio. It shows that fear measured by the ratio never reached the extreme level associated with past lows in the equity price index. This reinforces what the sentiment surveys are showing... sentiment isn't at a level indicating a low-risk entry point. So invest with caution.
The survey information above can be obtained for free via the following sites. Investor's Intelligence is from Market Harmonics. Individual Investors is from aaii.com. Low Risk is from lowrisk.com. Birinyi Bloggers is from Ticker Sense. For additional information about market sentiment, I recommend a blog by Brent Leonard.
Sentiment analysis is an important component when following the markets, and is considered a “contrary” indicator. Contrary because if too many people are bearish then there aren't enough sellers left, the balance tips to buyers, and the market starts to advance. If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens. One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.
Keep in mind, sentiment analysis is not a science and only provides very general information. Sentiment is not a signal to take action, but provides background about the current state of the markets. For instance, there have been many occasions when bullishness reached high levels well before the market started to weaken.
Appreciate your work...keep it up. (Comment this)