Our sentiment indicator measures the extremes of emotion in the stock market. When the indicator falls below –5%, the market is approaching an important low. When it is over +5%, the market advance is extended and overbought.

I have used this indicator for over 35 years and have found that the buy signals (-5% or lower) generated were very reliable indicators of emotional extremes and consequently, selling pressure exhaustion. On the other hand, sell signals (+5% or higher) were generally areas where at the least, buying should be avoided; lightening up positions is advised as the market is temporarily extended.

Comparing this sentiment indicator with the Dow Jones Industrial Average dramatically shows that when the indicator, once below
–5%, reverses, the market decline is over, and the market should be bought.

Privacy   Disclosure