I define sentiment as %-bulls using selected long/short Guggenheim funds by calculating Bulls/(Bulls + Bears) based on assets in the funds at the close on any given day. My Sentiment indicator is then just a simple 5-day moving average (dMA) of the daily data.
I have reviewed the 5-tops in the
S&P 500 over the past 3-years and noted that sentiment has peaked at 63%-bulls
(5dMA) around those tops. Previously, my
sell-signal for sentiment had been 67%-bulls (5-dMA). That really is an indication that investors
change their behavior, so I have adjusted the Sell signal for the sentiment
indicator to 63%-bulls. The buy signal
remains unchanged.
For now, the important value is
the sell-at-the-top signal. The 5-dMA
%-bulls was 63% at yesterday’s close so sentiment is suggesting a top.
Sentiment is only one indicator
and the NTSM analysis requires more than one indicator to generate a sell
signal. Sentiment usually (but not
always) peaks after a top when the buy-the-dip crowd jumps in.
Currently, Price, Volume, and VIX
indicators remain neutral so the Navigate the Stock Market analysis remains HOLD
at the close on Friday.
STATISTICALLY SIGNIFICANT DAYS
The last three days (Wed thru Friday) have been statistically
significant days (exceeding a high percentage of the data set) based on today’s
move in price-volume when compared to previous data. Normally, a “statistically significant” day occurs
with at least a 1% change in price. The
lack of volatility has reduced this number.
One normally sees a number of significant days at a top due to investor conflict. Tops seem to bring out strong feelings in
investors – both buying and selling. This creates more movement in price.
The last three-days have been up-down-up. You may recall that I was calling for at
least a 1% up-day to suggest the top was in. That 1% was based on the “usual”
statistically significant day. It is not
as clear that these lower values (averaging 0.75% over the three days) are as
meaningful, but I suspect they are. That’s
a long-winded way of saying it looks like a top is in to me.
The NTSM analysis hasn’t confirmed it yet. We’ll see.
MARKET RECAP
Friday, the S&P 500 finished up 0.7% to 1557 (rounded). VIX was down 3% to 13.57.
Friday, the S&P 500 finished up 0.7% to 1557 (rounded). VIX was down 3% to 13.57.
NTSM
Friday, the NTSM analysis remained HOLD at the close.
As noted above: Sentiment is a Sell and other indicators are all neutral
leaving a HOLD for the overall NTSM analysis.
MY INVESTED POSITION
I remain about 20% invested in stocks as of 5 March, due to my risk
tolerance rather than the numerical NTSM analysis. To put it bluntly, I currently have no
tolerance for risk. (If I were strictly
following the NTSM numbers, I'd still be heavily invested in stocks.) My
reasoning may be found at…http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
