Another favorable continuation signal from hedge fund exposure

When hedge funds are underexposed in the stock market, they offer strong buying potential, and vice versa. Instead of trying to pick a bottom or top in hedge fund exposure, I like to look for a reversal after a period of low readings. This suggests that hedge fund managers have returned to buying mode, which can lend bullish weight to the market. However, I do not use this as an automatic buy signal or trading system, but as weight of the evidence that may confirm an established uptrend.

The red dots in the following chart note all dates when the 20-day average for our Hedge Fund Exposure - Stocks indicator crossed above 0. This suggests that hedge fund managers were under-exposed (i.e., a reading below 0) and have recently moved into buying mode (the cross above 0). 

Historical results are solid (74% or higher Win Rate for all periods 1 month and out, and a 1-Year Win Rate of 94%).

Does the latest signal on August 8th constitute a table-pounding buy signal? Not necessarily. But it does lend further weight to the favorable side of the weight of the evidence ledger.