A common technical indicator for the direction of the future direction of the stock market is investor sentiment. It is actually a contrarian indicator: the more bullish investors are, the less likely the stock market is to go up, and vice versa.
There are a number of sentiment surveys that are constantly updated -- four that are published in Barrons each week, and another that appears here on SI at techstocks.com
I have downloaded data from the AAII survey going back to 1987, and backtested various schemes against the S&P 500, and found that can attain a significantly higher portfolio return by getting out of the market when the percentage of bulls exceeds 55%, when averaged over two weeks, and remain out of the market for 12 weeks until that 55% bullish condition disappears. |
