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Composite Sentiment Indicator

thetechnicaltake's picture




 

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. SP500/ weekly

 

Currently, we are seeing bullish extremes (i.e., bear signals) in the "dumb money" indicator and in the Rydex asset data. As highlighted in our weekly look at investor sentiment, company insiders are increasing their selling. By the close of this week, it is expected that their selling will be extreme as well. Therefore, this composite sentiment indicator will have turned red in color indicating a strong headwind for higher and sustainable prices. The prior 4 extreme readings are noted on the chart. While prices did go higher in several cases, investors need to understand that we are nearer the end of the rally. Or at best, there might be a short term pullback in the works that lasts beyond 30 minutes.

 

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Wed, 02/22/2012 - 17:54 | 2186528 Skip Danger
Skip Danger's picture

I see your 'thingy' often leads the market quite a bit. Very similar to my 844 Switch.

http://www.youtube.com/watch?v=ka8jTINjMhs

Wed, 02/22/2012 - 16:33 | 2186190 asteroids
asteroids's picture

For the market to go down there has to be fear among large holders of stock. Hedge funds, pension funds, etc. With an impllicit chairsatan PUT, why would you want to sell? No fear, hence no reason to sell. All this action is probably computer generated.

Wed, 02/22/2012 - 16:14 | 2186124 MrBoompi
MrBoompi's picture

With the low volume, near constant injection of newly printed money into equity markets, and HFT shinanigans, why would you think the market would go down?

Wed, 02/22/2012 - 16:08 | 2186099 adr
adr's picture

With Bernobameitner in charge there are no rules. We're making everyting up as we go. Booking ten years of profit on estimates of 10% per year growth right now, PERFECTLY ACCEPTABLE.

Wed, 02/22/2012 - 15:17 | 2185806 NEOSERF
NEOSERF's picture

Throw the old rules, addages, and "truisms" out the window, with Central banks pumping cash into banks and no where else to invest a dollar, equities will gain unless the crash comes...

Wed, 02/22/2012 - 15:12 | 2185790 vote_libertaria...
vote_libertarian_party's picture

It looks more like a 'ST buy' indicator...

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