Why Beans Should Bounce

No oomph in Oscillator

The McClellan Oscillator hasn’t been able to get above zero even as the S&P 500 and other indexes tick to new highs on multiple days.

Over the past 57 years, this has been a negative sign of underlying weakness for stocks, though the sample is small, and the most recent signal was a failure.

A single grain of optimism

Grains have been sold relentlessly lately, and it’s being reflect in sentiment. In soybeans, the Optimism Index has dropped below 18 for one of the few times in 28 years.

Every time optimism has been this low, beans have rebounded over the next two months. Even when sentiment was a bit less extreme, it still had a strong record.

Nearing a record

Dumb Money Confidence moved up to 85% on Tuesday, nearing the record of 88%. According to the Backtest Engine, there have been 19 days with a reading as high as it is now, with only 6 of them leading to a gain in the S&P 500 over the next two weeks. Some higher-risk indexes like the Russell 2000 and emerging markets often fared worse. You can test them by changing the Index in the first box of the Backtest Engine.

Rolling over

The McClellan Summation Index for the Hang Seng and Shanghai Composite have dropped below +500 after recently hitting +1,000. Both indexes have struggled to hold any gains over the next 1-3 months after similar conditions in the past 17 years.

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.

The post titled Why Beans Should Bounce was originally published as on SentimenTrader.com on 2019-05-02.

At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.

Follow us on Twitter for up to the minute analysis of market action.

Not ready to signup up for a free trial yet?

Signup for our Daily Lite email to receive highlights of our daily report, research and studies.

Follow us on Twitter:

Subscribe to our Youtube Channel:

RSS Feed

Subscribe to the Blog RSS feed