Sentiment AT extreme values

A more accurate title for yesterday’s blog would have been “Sentiment AT extreme values”.  Sentiment is sky high, but that doesn’t always indicate a problem.  Usually, the crowd is wrong and you can bet on it. (i.e., when 2/3 of investors are playing options on the buy-side, it’s time to sell).  Sometimes, however, the crowd is right.  That happens after a major correction and everyone goes long as the market goes up.  Did we just get thru a major correction?  Not exactly, but we did have a period of mostly sideways action that lasted from 18 Feb to 26 April…more than 2-months…and included a 6% correction.  That was followed by good news on earnings and employment.  So is it simply, the crowd is right this time?  Maybe so. 

Sentiment is a lagging indicator and all of our other indicators are currently neutral, so I don’t see any confirmation of the high sentiment reading.   We’ll see.

NTSM analysis was HOLD today.

The Navigate the Stock Market system switched back to Buy on 20 April so I remain 100% long in stocks. (See the page How to Use the NTSM System).  That is way too aggressive for most people and I don’t recommend it unless you have a high tolerance for risk.

PS. I tried to check sentiment values over at the Investor’s Intelligence Survey at Market Harmonics.  That free service is now gone and Investor’s Intelligence has become a subscription service.  Their sentiment data was derived from polling financial advisors, but I’d rather use my data since mine is based on where investors are putting their money.