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 |
Happy two-Martini Friday! I had a rough week. Posting to this blog is a lot more fun than the week I had.
Last week I mentioned the window of opportunity was quickly closing for the best buying opportunity. We are getting close to the neutral zone where buying is riskier. From a contrarian point-of-view, sentiment is still favorable, but well off the terrific levels of a few weeks ago.
Who says nothing is free. Market Harmonics provides these terrific charts every week for us completely free of charge. I'm not sure why they do it. I'm certainly not clicking on their banner ads, and I don't know who does.
A couple years ago before the housing collapse these charts would be a screaming buy. They still look good, but just not as good as early April.
As mentioned in Thursday's post (that I published a few minutes ago), I'm averaging into commodities and the related stocks. I'm basically buying the best opportunities within the entire group and not worrying about timing the market or protecting profits. But I'm still timing the rest of the market though, being patient, looking for lows to buy and the highs to sell.
Right now, the money allocated to timing isn't much, but it is in cash. I was shaken out by the rising level of new 52-week lows.
More later... Be sure to check out the web sites and blogs listed below.
The survey information mentioned can be obtained for free via the following sites. Investor's Intelligence is from Market Harmonics. Individual Investors is from aaii.com. Birinyi Bloggers is from Ticker Sense.
For a thorough review of market sentiment, I recommend Brent Leonard. For excellent information about the VIX, check out VIX & More and Marty Chenard.
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.
