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Strategies & Market Trends : Complacency Indexes
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To: bob wallace who wrote (432)1/28/2002 10:20:05 PM
From: TechTrader42   of 1487
 
Bob: I don't have a firm conviction on which way the market will wind up going, btw. I have my hunches, but hunches are frequently wrong. I really don't think the market is predictable. The CI's provide a possible indication, among many.

It's interesting that so many oscillators aren't overbought at all. The sentiment indicators and measures, which are overbought, are saying something very different than the usual TA indicators. It'll be interesting seeing how it all turns out.

From the NYT this weekend:

nytimes.com

Don't Underestimate the Power of Contrary Thinking

By JONATHAN FUERBRINGER

TOCK market sentiment is becoming extremely bullish.

In the last three weeks, the sentiment data from Investors Intelligence has popped above an important threshold. The ratio of bulls to bears among about 130 investment newsletters has risen above two to one. The percentage of bearish newsletters has dropped to near lows not seen since 1992.

In addition, an index of volatility compiled by the Chicago Board Options Exchange has been falling, showing that investors are less worried about sharp moves in the market, especially big turns.

Investor sentiment is often seen as a contrarian indicator. According to this view, when people turn bullish, the outlook is not really good. So how should an investor weigh the current news?

One way is to look at how contrarian indicators have performed in the past. A quick check shows that the sentiment indicator compiled by Investors Intelligence has been on the mark lately.
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