Investor Sentiment: Happy New Year!
Have A Happy, Healthy and Prosperous 2013!
In January, 2013, I will be introducing a new subscriber product called “TacticalBeta”. TacticalBeta is a website that is all about a strategy commonly employed by hedge funds and endowments and that encompasses the best practices of generations -- tactical asset allocation.
The TacticalBeta subscriber will have exclusive access to our proprietary Daily Sentiment Report, Weekly Sentiment Report, and The Chart Book. There are two model portfolios, trade recommendations, and options to download our proprietary data used in our trading models. Our content will be more actionable and useable for investors. If you currently receive TheTechnicalTake via our free weekly newsletter to your email inbox, this service will continue without interruption.
TacticalBeta is a collaborative effort between me and the InvestingChannel, which is a global media company with a platform that spans over 300 financial websites with a reach of over 10 million viewers monthly.
TacticalBeta is asset allocation with an edge!
The “Dumb Money” indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. This indicator shows extreme bullishness. A bear signal is confirmed when the indicator crosses back below the upper trading band.
Figure 1. “Dumb Money”/ weekly
Figure 2 is a weekly chart of the SP500 with the InsiderScore “entire market” value in the lower panel. From the InsiderScore weekly report: “Our market-wide sentiment reading continues to be within the Strong Sell Bias range. The closure of trading windows at some companies as the quarter ends and the holiday season is impacting trading volume, but it’s clear that insiders are more comfortable selling, rather than buying, right now. As we’ve discussed before, we believe that the specter of higher taxes in 2013 has been influencing some insiders to decision sell.”
Figure 2. InsiderScore “Entire Market” value/ weekly
Figure 3 is a weekly chart of the SP500. The indicator in the lower panel measures all the assets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall. Currently, the value of the indicator is 62.89%. Values less than 50% are associated with market bottoms. Values greater than 58% are associated with market tops. It should be noted that the market topped out in 2011 with this indicator between 70% and 72%.
Figure 3. Rydex Total Bull v. Total Bear/ weekly
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Category: Market Sentiment
