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Major Market Excesses as We Head into the Holidays

By John Del Vecchio and Brad Lamensdorf

This week’s Chart of the Week is quite clever. 

It’s not something you will see in the mainstream financial media. It’s a beautiful representation  of extreme optimism or pessimism.

It’s courtesy of SentimenTrader.com.

It measures all of SentimenTrader’s indicators and analyzes whether the indicator is too optimistic or too pessimistic. Sentiment indicators. Technical indicators.

It’s the indicator of indicators.

Today it is flashing major warning signs.

Let’s take a look.

Major Market Excesses as We Head into the Holidays
Major Market Excesses as We Head into the Holidays

As the market has marched higher (black line on the top), the level of indicators reaching extreme optimism has exploded higher (red line). Meanwhile, pessimism has dropped like a rock (blue line).

Compare this to the lows in March and April when the situation was reversed. 

Risk is higher here. There’s too much leaning too far in one direction. It won’t take much to swing things the other way.

Buyer beware.

Speaking of SentimenTrader, the have teamed up with Active Alts to launch a long / short strategy the uses numerous indicators to better manage risk. Right now, the Exposure Gauge is signaling for a big things to come. Why not give Brad a call to discuss how this gauge can help better manage your investments?

Schedule a call here.


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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