We want you to improve your trading and investment returns by increasing your
knowledge of, and access to, one of the more important and effective keys to
stock price movement - investor sentiment.
Please note that I did not say the "only" key - sentiment analysis is only one
part of a complete trading or investing strategy. We feel our analysis should be
incorporated into other thoughtful technical and fundamental work, and not be
used in isolation.
Why don't we try to present everything? Because we have one unique niche - market
sentiment - and feel that you can get more complete technical and fundamental
For the sentiment analysis part of your work, we strive to be the go-to service
that you turn to for help. In addition, academic studies have shown that up to
50% of an individual stock's movement is caused by general market forces, an
additional 30% is influenced by the sector the stock is in, and only 20% is
specific to that stock. We concentrate on the 80% (market and sector).
Our focus is not "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.
A note about sentiment in general: it works best when going with the major trend
but against the immediate trend. For example, "excessive pessimism" readings
will have a very high rate of success at preceding rallies during long-term bull
markets, but will be less accurate during bear markets.
"Excessive optimism" readings will precede corrections with consistency during
bear markets, but will be less accurate at pinpointing tops in bull markets. We
try to wrap our analysis and studies in that context...but even if we fail to do
that, please remember the above.
Our Approach to the Markets
- The goal isn’t to “beat the market”, it’s to find low-risk, high potential
reward opportunities for those looking for entry and exit points for long
and short positions.
- The ultimate setup (stress on “setup”) for an opportunity to buy is one
where insiders are buying heavily, while the public is selling heavily. A
great preference is placed on instruments that are in long-term uptrends or
sideways ranges. Such setups in consistently downtrending markets are less
consistent and more likely to hit stop losses.
- Defining “uptrend”, “downtrend” and “rangebound” is all subjective. We have
found the slope of the 200-day (or 40-week) average of an instrument has
tested as well as just about anything else. Just use an eye test – over a
three-year period, if the instrument is carving out higher highs and higher
lows, then it’s in an uptrend (focus on buying opportunities). If lower
highs and lower lows, a downtrend (focus on selling opportunities). If you
can’t really tell, then it’s range-bound (both buying and selling
opportunities can work well).
- Sometimes we get caught in large-frame trend reversals when an instrument is
transitioning from uptrend to rangebound to downtrend, and vice-versa.
Failures and losses happen. Risk control is paramount, no matter how good
the opportunity seems.
- Once a setup is identified, use the simplest of methods to determine an
entry/exit. Our preference is using trendlines going out no more than 1-3
years at most that are obvious and have a tendency to trigger a reverse in
sentiment by the public. We place little to no weight on common (or obscure)
technical patterns. We will rarely if ever discuss triangles, head and
shoulders, Fibonacci or other commonly referenced techniques and patterns.
- The most typical time frame for the best risk vs reward outlook is 1-3
months, but that can vary quite widely - some are viewed in days, others in
- We have tested thousands of technical indicators across years, decades and
in some case centuries of data. None work consistently across time frames
- There are ways to optimize trades, depending on whether one prefers to trade
options, futures, ETFs, stocks, etc. We focus on the opportunity, not the
trade itself due to the wide risk tolerances, time frames, skill levels and
other factors among readers.
- We are not proponents of averaging a losing position. A trade that moves
against us tells us that we are wrong, and we don’t want to compound errors.
Adding to a winning position is mentally difficult, but we generally want to
stick to positions where the market is telling us our thesis is correct.
A post-close Sentiment Report is emailed to all subscribers, typically by 6:30pm
EST (almost) every day that U.S. markets are open for trading. Bulletins are
sent on an ad hoc basis when warranted. All reports are posted to the website
and archived before being sent.
Please note that SentimenTrader is NOT an email-based service. We send emails
strictly as a courtesy.
If you don't see emails from us within 48 hours of subscribing, then be sure to
check any spam folders in case they gets routed there. This is especially true
of those using Gmail, Comcast, Yahoo and AOL email services.
Please understand that forwarding or other distribution of any email or other
content on SentimenTrader without prior permission is a violation of your
subscriber agreement and copyright laws.
A Note About Studies
We post a lot of studies in the Reports. Sometimes, the conclusions from the
studies will conflict with one another on a day-to-day basis, or even on the
same day. And sometimes if the market moves in the direction a study suggests,
it will satisfy the conclusion faster than expected.
This is when the "art" of trading and investing comes to the fore. We don't trade
any studies on a mechanical basis, but rather use them in a
weight-of-the-evidence approach. A study that gives a solid edge with a large
sample size will definitely influence our outlook, but no study is an end-all,
be-all. We wrap it into a more comprehensive view of how markets are acting.
Navigating The Site
It would be easy to get lost in this site, as it can be a bit like trying to take
a drink from a fire hose, so the most important step you can take initially is
to be sure of the time frame in which you are trading.
For longer-term investors, who have a time frame of months and more, it usually
does not pay to take the shorter-term models and indicators into account right
away. For shorter-term traders, it is best to begin with a few of the
longer-term indicators and models and work your way down to your time frame.
My best advice is to take some downtime to find a handful of measures that you
find worthwhile - do not get caught in information overload by feeling you need
to keep tabs on everything! If something that you don't normally follow gives an
extraordinary reading, then I will almost always touch on it in one of the
Here is a quick overview of the navigation:
||This is the "home page" for
subscribers. Any important announcements will be listed at
the top of this page. It contains a brief short- and
intermediate-term summary of our current thoughts, as well as a
quick guide to any extremes in our models, indicators
We use several ways to communicate:
Sentiment Report -
This summary report is posted to the site each evening after the markets close and emailed to subscribers.
Premium Notes - These can cover any topic, usually related to sentiment. There is no regular schedule for these.
Twitter - I'll post quick stats, links or other items that may be of
sentiment-related interest with no set publishing schedule, but
again it is not "must read" and if you choose to ignore it, no big deal. You can find the Twitter posts here.
This is the main point
of access to reach each of the indicators currently posted to
SentimenTrader. A summary page is presented, as well as links
the interactive chart and a detailed discussion of each one, with
important levels to watch. Once you know which ones you'd like
to follow, you can use the
Favorites page to save them.
There are summary pages for:
Like moon phases on
tidal activity, there are forces at work in the equities markets
that are not fully understood.
We do not place much emphasis on
This page will give you a
glimpse at some of the most consistent biases.
Once you're familiar with the site and know what you'd like to see, be sure to
check out the time-saving links at the top of most pages, which drop down as you
put your cursor over them, saving you many steps to get to the charts you
About Our Charts
Almost all of the indicators and models on our site are bounded by green and red
If an indicator travels outside of its green band, then that equates with
"oversold" conditions, for lack of a better word. When this happens, we
typically see prices rise going forward.
When an indicator goes outside of its red band, then that means the indicator is
"overbought", which most often leads to a market decline or consolidation.
We have inverted the scales on some indicators (i.e. flipped them upside down) so
that an indicator that is overbought is peaking towards the top of the chart,
while one that is oversold is scraping along near the bottom of the chart. While
it is counter-intuitive for certain indicators, presenting them this way allows
us to more easily see how peaks and troughs in the indicators coincide with tops
and bottoms in the market.
The models and indicators that are updated daily are usually updated by 5:30 PM
CSAT each evening unless there is some extenuating circumstance. An exception is
the Rydex asset flow data, which is not released until late each evening or
early the next morning.
We do not intend our models or portfolio changes to be trading signals for any
The models are meant as secondary indicators, not as a trading system unto
themselves. Please follow your own methodology and use the models and indicators
as additional confirmation. We do not, in any sense, recommend that subscribers
place a trade simply based on a model or portfolio change.
If you need to update any of your account details, such as email address or
credit card information, you may do so in the "My Account" section of
We take feedback very seriously, so if you have any suggestions for how we could
better meet your needs, please feel free to contact me directly.
I wish you profitable trading!
President and CEO
Sundial Capital Research