Friday, May 24, 2013
Sentiment Update – Buying the Dip Again!
Sentiment hit 72% at the close today, Friday. That means that almost 3 out of every 4 traders are betting that Tuesday (Monday's the holiday.) will be an up-day in the Guggenheim/Rydex funds I follow. I track the “success” of these trades and as of Thursday, traders were correct only 30% of the time over the last month. That’s why sentiment tends to be a counter indicator (extreme bullish values imply a negative outcome for the market)…and it isn’t just the daily sentiment value.
The 5-day moving average of sentiment hit 71% at Friday’s close. Going back 4-years I could only find 1-day when sentiment got this high and that was after a bottom. (I was too lazy to open my archived files to check this further back.)
Conclusion: This is looking more like a top.