Contrarian buy…That’s interesting, especially since it is somewhat counter to my sentiment analysis. The article said, “Equity allocations saw the second-biggest drop on record, while cash holdings jumped by the most since the 2011 debt-ceiling crisis, the June poll showed.” While that sounds very bullish, I wish we had the numbers. Mine are currently neutral, but leaning bearish.
I measure Sentiment as %-Bulls (Bulls/{bulls+bears}) based on the amounts invested in Rydex/Guggenheim mutual funds. This sentiment value is currently 88%-Bulls. The sell point (based on a standard deviation analysis of sentiment during the dot.com era) is currently 91%. We’re not that far from a sell signal – certainly closer to a sell than a buy. Since using mutual funds for long/short trading has limitations, this is considered “dumb money” and it’s wise to trade against the sentiment value, i.e., too much bullishness is bearish.
Still, I remain fully long.
