Dumb Money is in Control of the Market

By Brad Lamensdorf

Dumb money is pushing the market higher.

One chart I keep on my radar is the confidence spread of smart money in the market to dumb money. At the lows in March, smart money was all bulled up.

I was very bullish at that point too.

That was the correct call to make.

Now we have had a huge run from the lows and dumb money is starting to enter the market. As the chart below shows, the confidence spread has reversed sharply.

Dumb Money is in Control of the Market
Dumb Money is in Control of the Market

Dumb money is now in control.

I don’t know about you but I would prefer to follow the smart money. Not the dumb money. 

Risks are high here. Until market sentiment reverses course and dumb money takes it on the chin, it’s better to tighten stops, reduce exposure, and aggressively manage risk.

The Active Alts SentimenTrader Long / Short strategy uses numerous indicators, including sentiment, to identify market extremes and adjust exposure accordingly for superior risk-adjusted returns. To learn more, visit activealts.com

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