Monday, August 17, 2020

#Sentiment Review $SPX

The old American idiom of a day late and dollar short is an phrase easily applied to majority's ability to time (buy or sell) US stocks. The majority, influenced more by instinctual behavioral tendency of the individual to seek acceptance of an emotionally-driven crowd than act independently in the minority, views rising and falling stocks prices as bullish and bearish. This tendency that drives them chase when probabilities favor fading relegates the majority as the consistent bagholders of history's panics and trend changes.

Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”, John Templeton

Subscriber Comments

Sentiment toward stocks is euphoric or higher, says popular rhetoric on social media. The computer not only disagrees but also it defines the sentiment backdrop as extreme pessimism. Some might say extreme pessimism is bullish, but lingering extreme pessimism was common from 2001-2002 and 2007-2009, so investors must be careful. Investors are pessimistic for a reason. Extreme pessimism doesn't always fuel rising stock prices. Stocks have rallied (for now), because the world views stocks as a better parking destination than debt.

S&P 500 (^GSPC) and American Assoc of Individual Investors Weighted Average Sentiment (WASo)

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