Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

A Historic Sentiment Shift

Jason Goepfert
2019-08-09
null

Irrational pessimism

The survey of individual investors from AAII can be noisy from week to week, with sometimes drastic changes. Even so, it’s rare to see them change as much as they did this week, with one of the largest drops in optimism in history.

Sentiment became so low, during a generally uptrending market, that it has only preceded gains in the past. The one-week drop of more than 30% in the Bull Ratio is extreme for any kind of market environment, and again led to only gains over the medium- to long-term.

Island time

Traders panicked on Monday morning, forcing the futures well below Friday’s close by the time regular trading hours opened. After chopping around for a couple sessions, they did the opposite on Thursday, with an unfilled gap up. That left an island reversal in S&P futures, which has been a reliable sign of capitulation.

In an age of dominant passive investing high-frequency trading, price patterns may not be as reliable as they have been in past decades. But it’s at least worth considering that only one precedent led to a loss over the next 6 months.

Taking no chances

According to Lipper, investors yanked more than $25 billion from equity funds this week, the 2nd-most in 17 years. According to the Backtest Engine, any week with an outflow more than $20 billion led to gains in the S&P 500 every time over the next 6 months (and only one exception 2 and 8 weeks later).

No letup

The MSCI Emerging Markets index suffered 10 straight down days, culminating in its lowest level in more than 6 months. That’s only happened twice before in 30 years, in September 1990 and August 1998. Both led to more losses in the shorter-term, but a year later the index was higher by more than 35% both times.

This post was an abridged version of our previous day's Daily Report. For full access, sign up for a 30-day free trial now.

DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.