Thursday, April 28, 2005

Bearish market sentiment grows

When I analyze the stock market, I like to take into consideration fundamental analysis, technical conditions, and also sentiment readings. Right now, it is the sentiment picture that is getting my attention. When market sentiment grows extremely bearish, it is usually a good time to be a contrarian, and put some money to work in stocks.

Some of the readings that stand out to me right now include:

  • The bull/bear spread in the Investor's Intelligence survey is the most narrow (+14%) since August 2004
  • The bears in the AAII survey have matched or exceeded bulls for 6 out of the last 7 weeks
  • The 10-day put/call ratio hit it's highest level since May 2004
It's always hard to try to pick bottoms in the market. But if you buy into big declines like the one we're currently in, and sell into more euphoric phases when sentiment looks unanimously bullish, you'll likely be ahead of the game (and the herd).

(if you have any questions about these indicators, just post a comment for me)


At 12:08 PM, Blogger adam said...

Buy Everything!

and Good luck also.

At 1:15 AM, Anonymous AJ Kaufman said...

Yes, it is a sentimental time for all of us in these days of volatility in the Market. I just can't wait for non-farm payrolls this coming Friday!


At 12:36 AM, Blogger Herb said...

So many blogs and only 10 numbers to rate them. I'll have to give you a 8 because you have good content.

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