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Market Sentiment Indicators Warn: “Stay Cautious”

Intermediate sentiment indicators show investors have become slightly less bullish during the past week. But viewed as contrarian indicators that doesn’t mean we’ve reached a major bottom and you should throw caution to the wind. The Ned Davis Research (NDR) Crowd Sentiment was slightly less bearish at 62% compared with the previous week (70 is a sell signal), but still signaling caution. The Investors Intelligence poll of more than 100 newsletter writers remained clearly bearish as a contrarian indicator with 57% of the newsletters bullish and 18% bears.

The CNN Fear’/Greed Index was at 8 while the NDR short-term sentiment gauge was at 36, signaling the markets may be reaching oversold territory for the short term, but both are far from signaling the markets are reaching bullish territory.

In other words don’t be fooled by temporary upswings in the market. The worst may be yet to come.

Fear and Greed - Sentiment Chart Oct 11, 2018
Fear and Greed – Sentiment Chart Oct 11, 2018

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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