Escalating High Yield CDX Index Spread Shows Things are Getting Really Ugly

Escalating High Yield CDX Index Spread Shows Things are Getting Really Ugly.  In good times the spread between the High Yield CDX Index and Treasuries narrows. That’s because lots of investors are very confident in the state of the economy to buy high yield bonds despite their below-grade ratings. However, as the chart below shows,…

Investor Sentiment is Extremely Fearful, Indicating Stock Market is Oversold: But  Be Careful!

Investor Sentiment is Extremely Fearful, Indicating Stock Market is Oversold: But  Be Careful!  We use investor sentiment as contrarian indicators of where the stock market is headed because investors historically are wrong.  The recent huge market drops have driven investor sentiment to levels of extreme fear, indicating the stock market has become oversold.  That spells…

Watch Out! Bear Markets are Extremely Volatile and Bear Traps For Unsophisticated Investors

Watch Out! Bear Markets are Extremely Volatile and Bear Traps For Unsophisticated Investors.  The charts below of bear markets going back to 1929 show they are marked by extreme volatility with sudden surges amid longer term downward moves. If we have now entered another bear market, this kind of volatility can result in major losses…

Why Increasing Investor Stock Market Pessimism Doesn’t Mean It is Time to Buy

Why Increasing Investor Stock Market Pessimism Doesn’t Mean It is Time to Buy. We use investor sentiment as contrarian indicators about the direction of the stock market because historically investors are wrong. Although sentiment indicators are showing growing investor pessimism about stocks as an investment, they have not reached historical fear levels that we believe…