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Category: Sentiment Updates

Bullishness Reaches Extreme Levels

By John Del Vecchio and Brad Lamensdorf

As Alexander Hamilton once said, “the masses are asses.” He probably wasn’t referring to the collective wisdom of investors, but it could easily apply to this group.

As a group, investors are terrible at projecting forward market returns. 

When investors are leaning too far bullish or bearish, it creates great risk / reward opportunities.

We love extremes.

Right now, we are at an extreme in bullishness. 

Newsletter sentiment is currently 60% bullish and 19% bearish. We are projecting that the bullish number could tick up another 2-3% next week as the 60% level was hit before the vaccine announcement earlier this week. 

These levels are rare.

A bullish level above 60% happens about 6.4% of the time going back 50 years. A spread of 40% happens 8.8% of the time. A combination of the two? Just 3.8%.

As we all know, we are not in normal times. It’s certainly not normal in terms of market sentiment.

When this situation occurs, market returns are just 0.4% three months out. Of course, that doesn’t mean they are flat. It could mean a major ass kicking and then as sentiment normalizes a market bounce occurs to claw back to even. 

Sentiment could be right this time. But, probably not. Markets change. Human nature stays the same. 

Looking back at recent history over the last 15 years, every major correction has been preceded by this big spread in bullish / bearish sentiment. 

Bullishness Reaches Extreme Levels
Bullishness Reaches Extreme Levels

Conclusion?

Hamilton was right. The masses are asses.

It’s also important to note that the average investor is overly bullish too. We do not put as much weight into this indicator as we do newsletter writers. But we are also well outside the norm.

Here’s some quick stats on where we are.

Bulls are 56%. That’s in the top decile of the last 33 years. It’s in the top 6 since the March, 2009 low. We should point out that March, 2009 was the most bearish period ever. Right before a huge bull market run.

The bull to bear spread is 31%. That’s in the top give in history. 

Both of these levels are the highest since January 2018.

Want to know more about how sentiment can impact your portfolio?

Why don’t you give Brad a call?  Brad’s Active Alts SentimenTrader Long/Short Strategy combines several decades of experience and research and actively positions the portfolio to take maximum advantage of market extremes. In both directions.

Book a call here.

Bulls are at Highest Levels in Years!

Check out Brad’s commentary this week on:

InvestingChannel

Core London TV

FINANCE | POLITICS | NETWORK

Bulls are at Highest Levels in Years!

Why don’t you give Brad a call and get his market insight on Sentiment personally?  Brad’s Active Alts SentimenTrader Long/Short Strategy combines several decades of experience and research and actively positions the portfolio to take maximum advantage of market extremes. In both directions.

Book a call on Brad’s calendar here.

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Sentiment Gauges in the Stock Market Continue to be a Concern

Sentiment Gauges in the stock market continue to be a concern . Below is the 7 day put/call ratio  created by Hedge Fund Telemetry. As you can see it gave a fantastic

Buy signal in March. However, it currently is in very bearish territory and is a big concern that the market needs to have a large correction. Investor intelligence is also

In the high risk Zone with bullish newsletter letter writers at 59% bulls and 20% bears, a +39% spread. This is worrisome and has pushed the Active Alts Sentimentrader L/S

Strategy to a more hedged position.

Sentiment Gauges in the Stock Market Continue to be a Concern
Sentiment Gauges in the Stock Market Continue to be a Concern

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Stock Market Sentiment Remains Complacent

By Brad Lamensdorf

The pros are back at it again.

The National Association of Active Investment Managers (NAAIM) Exposure Index is fully loaded into stocks.

Stock Market Sentiment Remains ComplacentStock Market Sentiment Remains ComplacentThe NAAIM is quick to point out on their own website that their own survey of members has little predictive value.

That begs the question, why take the survey in the first place?

There is one thing that is predictive.

Human nature.

Collectively, we make huge boneheaded errors. Look at that chart above, and the NAAIM index was at very low levels just before a huge run in the markets. 

That was when the best high reward / low risk trade was on the table. In fact, the best trade in years.

As usual, they were late to the game.

Now they have placed their bets and all of their marbles are on the table. This comes at a time when newsletters are too bullish, valuations are stretched, and speculators have taken levered lottery ticket bets in the options markets for the privilege of losing their money.

The Active Alts SentimenTrader Long / Short strategy uses numerous indicators, including sentiment, to identify market extremes and adjust exposure accordingly for superior risk-adjusted returns. To learn more, visit activealts.com 

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Dumb Money is in Control of the Market

By Brad Lamensdorf

Dumb money is pushing the market higher.

One chart I keep on my radar is the confidence spread of smart money in the market to dumb money. At the lows in March, smart money was all bulled up.

I was very bullish at that point too.

That was the correct call to make.

Now we have had a huge run from the lows and dumb money is starting to enter the market. As the chart below shows, the confidence spread has reversed sharply.

Dumb Money is in Control of the Market
Dumb Money is in Control of the Market

Dumb money is now in control.

I don’t know about you but I would prefer to follow the smart money. Not the dumb money. 

Risks are high here. Until market sentiment reverses course and dumb money takes it on the chin, it’s better to tighten stops, reduce exposure, and aggressively manage risk.

The Active Alts SentimenTrader Long / Short strategy uses numerous indicators, including sentiment, to identify market extremes and adjust exposure accordingly for superior risk-adjusted returns. To learn more, visit activealts.com

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