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Investor Sentiment on Stock Market Remains in Caution Zone

Investor Sentiment on Stock Market Remains in Caution Zone.  We use investment sentiment as a contrarian indicator of market direction because investors are usually wrong. As a result, investors tend to buy on the high side and sell on the low side. Professionals use sentiment and other market indicators to determine when markets are overbought or oversold to maximize profits and protect assets. Investor sentiment indicators this past week remained in the caution zone, although slightly less bullish than the week before.

The Investor Intelligence poll of market newsletter writers shows the bulls retreating to 53.3% from 54.8% last week , and their previous 2019 high of  58.1% before that. Bullish sentiment above 50% indicates investors should remain cautious. Bearish sentiment was basically unchanged at 17.2% vs. 17.3% the previous week. Anything under 20% historically means it is not a good time for buying. The bull-bear spread (see chart) contracted to +36.1% from +38.0% a week ago. Spreads above 30% signal increasing danger the higher they go up.

Investor Sentiment on Stock Market Remains in Caution Zone
Investor Sentiment on Stock Market Remains in Caution Zone

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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