Sentiment Indicators Warning Stock Market is Still in Dangerous Territory
Sentiment Indicators Warning Stock Market is Still in Dangerous Territory. We use investor sentiment as an important tool for indicating where the stock market is headed. Despite the market’s recent tumble, indicators such as The SentimenTrader’s Smart Money/Dumb Money Confidence spread, are warning the stock market remains in overbought territory. In other words, this is not yet a time to buy. The SentimenTrader’s Confidence Spread has narrowed somewhat to -0.31. This narrowing is from a recent extremely negative level of -0.61 (see chart), which forecast the downturn. However, the spread at -0.31 still is in negative territory as the smart money remains very cautious about intermediate prospects. In contrast, the dumb money remains overly optimistic, which is negative from a contrarian viewpoint because the dumb money historically is wrong.
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