Re Sentiment at Major Lows:
I've studied Market Sentiment extensively, and have historical data on most of the major sentiment indicators.
Yes, sentiment should be strongly bearish at lows, and very strongly bearish at major lows. The problem is, there are a lot of commentators and experts discussing sentiment, but very seldom does anyone show a detailed analysis of each sentiment indicator and its historical correlation with the Market. In particular, the Investors Intelligence survey is the most commonly cited indicator, but it is a "broken indicator", that is it no longer shows the range of fluctuation it once did, and has failed to give clear signals at the major highs and lows in recent years.
I use four sentiment indicators - all of which recently hit extremes of bearishness. Jake Bernstein's Daily Sentiment Indices give the best readings at each short-term high and low, and are published daily, but are sold by subscription.
There are, however, 3 indicators published weekly in Barron's that have reliably signalled all recent intermediate term highs and lows: the AAII Survey, Consensus Inc, and Market Vane. Because the AAII Survey results are extremely volatile week to week, I use the average of the 3 Bullish %s. They're in the Market Laboratory sub section of the MW Section, near the back.
I have the Investor's Intelligence data hand-charted back to the 70's, some of it would require a search. I have the 3 indicators from Barron's in Excel with graphs. If you want me to E-Mail any data to you, just give me your E-address. (I don't know how to do links on this site.)
I'm in the process of doing a major update of my indicators, and one thing I'm seeing this time is that my indicators have made more than one low, ie lows in bullishness, but each time the Market index, esp the Nasdaq has made a lower low. That's a subtler aspect of the indicators; they don't easily tell you the strength or weakness of the Market's underlying trend. Basically, it's best if bearishness gets extreme on a modest Market drop, while bullishness takes a long time to develop during a powerful Market advance, as in the 1993 thru 1995 period. |
