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Sector Sum Indicator Warning Stock Market is Extremely Risky

Sector Sum Indicator Warning Stock Market is Extremely Risky.  The proprietary Investor Intelligence Sector Sum Indicator measures how much the stock market is overbought or oversold. It has been a very reliable advance indicator of the direction of the equity market. The indicator works by analyzing the number of bull trends among the 45 major industry groups. As you can see from the chart below, at more than +40 the indicator is signaling the stock market is at its highest overbought level in the last 12 months. In other words, the stock market is extremely risky.  The indicator ranges from +40, overbought, to -40, oversold.  You’ll note in the chart how quickly the indicator has climbed to the present overbought +40 from an extremely oversold -40. The quick move from oversold to overbought is a clear warning for investors to lighten their portfolios. Moreover, it is another indication of how volatile the markets have become in this era of extreme economic uncertainty.

Sector Sum Indicator Warning Stock Market is Extremely Risky
Sector Sum Indicator Warning Stock Market is Extremely Risky

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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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