Good Fortune Advisory - Sentiment Indicator

Investor sentiment about the market is a contrary (inverse) predictor of its future direction. Good Fortune’s Sentiment Indicator SI tracks private investors bullish attitude on a weekly basis. Its alert points are 30 on the bearish side (alert to buy) and 50 on the bullish side (alert to sell).

The chart shows eight years of the S&P 500 Index with our SI as a numeric value. We see the high bullish values, 50 and above, at market tops and much lower values at bottoms, below 30. The market peaked in March of 2001 with an SI reading of 57. Declines continued into early 2003 with tops marked by high SI values. The bottom in 2003 with SI at 23 marked the start of a bull market ending in November 2007.

Into 2008 and 2009 we see a waterfall bear market with price highs marked by an SI of 50 and price lows with SI below 30. The current SI value of 26 on Feb. 4, 2009 suggests we may be at a short term low. As Trend TLI is bearish, conditions are too risky at present to enter the market on the long side.

We use SI to guide short term tactics with longer term strategy set by our Value Long-term Indicator and Trend Long-term Indicator.

Click here to see the full story and how to receive my report Mastering The Market's Mind covering our three indicators and disclosing their trading rules.