Investor Sentiment Suggests You May Want to Reduce Exposure
We use investor sentiment as a contrarian indicator of where the market is headed since investors are usually wrong. So just before the recent big downward moves, investors were extremely fearful. And what do you know? The market moved up. Now after the more recent moves up, investor short-term and intermediate-term sentiment has become more neutral, heading toward resistance levels. That indicates this may be a good time to take recent gains and reduce exposure.
The short-term CNN/Fear Greed moved from an oversold to an almost neutral 32. Similarly, the Ned Davis Research short-term gauge moved up 8 to 41. While not over bought they have both moved to a more mid-range at this point.
Intermediate-term sentiment also had some large upward moves. The NDR crowd sentiment moved to 50 from 41. Results from the Investors Intelligence poll of newsletter market writers shows bullish sentiment increased to 33% while the bears backed off to 27%.
The general market has had a large bounce, and sentiment has lifted with the market from oversold toward resistance levels. Which is a logical spot to reduce exposure.