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.