Market Timing Indicators Aug 2007
HNSI, VIX and Investors Intelligence
An analysis of Investor Sentiment Indicators that show stock market investors are currently more bearish than typical
Sentiment indicators are used by market timers as contrarian signals. The simple theory is if everyone is bullish and in the market with no new money to buy, then the only direction the market can go is down when someone decides to sell. Likewise, if everyone is out of the market, then the only direction it can go is up when someone decides to buy.
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HSNSI: Hulbert Stock Newsletter Sentiment Index: The HSNSI reflects the average stock market exposure among a subset of the market timing newsletters tracked by Mark Hulbert that engage in short-term market timing.
- The HSNSI record high is 79.7%
- The HSNSI record low is negative 31.3%
- A negative reading means the average timer is short the market.
As of August 9, this index was at 8.6% which was down from 44.5% on July 25th and 53.1% on June 5th.
Investors Intelligence
A survey of newsletter writers for their current market outlook. The typical reading is 45% bulls, 35% bears and 20% neutral. A chart of the data, including the four-week moving average of bulls over bulls plus bears is a great contrarian indicator.
- April 3, 2000 the reading was 67.79%
- July 19, 2002 the reading was 47.2%
- October 9, 2002 the reading was 50%
- Since November 1998, the record low 4 week moving average is 44.5%
- Since November 1998, the record high 4 week moving average is 76.9%
As of August 22, 2007 40.6% are bullish and 37.4% are bearish.
KLM-VIX: "Kirk Lindstrom's Modified Volatility (FEAR) Index"
This is a proprietary adjustment to the VIX. From Wiki, "VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Referred to by some as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period." Kirk's modified VIX graph shows periods of excessive pessimism that often match good buying opportunities when the other indicators above are also saying BUY.
- The KLM-VIX record high is 32.8
- The KLM-VIX record low is negative 3.2
- Absolute numbers are not as important as spikes (see graph) which show a sudden increase in fear
As of August 17, 2007, this index was 9.73
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Kirk Lindstrom: Disclaimers: Answers & my words are general in nature, are not meant as specific investment advice, and do not necessarily represent the opinion of anyone but Kirk.
