Sentiment Indicators Suggesting Stock Market Bottom for Near-to-Intermediate Term. Investor sentiment indicators historically are good indicators of the direction of the stock market. So, in these times of great uncertainty it is interesting to note that important indicators from SentimenTrader are signaling a near-to-intermediate-term stock market bottom. The chart below, which is a compilation of various sentiment indicators, indicates excessive pessimism on the part of investors. That is a positive for a market bounce from a contrarian point of view because the average investor usually is wrong. Note in the chart how pessimism peaked in the past just before upward moves by the S&P 500 index (SPX).
Another widely followed SentimenTrader Indicator measures the trading patterns of so-called “dumb” and “smart money.” As the chart below shows the Smart Money/Dumb Money confidence spread remains in positive territory.