Sentiment Indicators |

Sentiment Indicators

I’ve never been able to model these accurately and robustly, but the idea is intriguing for a contrarian (like I try to be). The question is what indicators to use, what time frame should you look at, how robust is the data, are you measuring coincident indicators/correlation/causation, how do you quantify the predictive value, etc. ETF’s have certainly given us some insight, as does watching the VIX. I was recently sent the following articles about using the Rydex levered bull vs. levered bear ETF’s. The first article looks at daily moves and the second at weekly moves. I have not tested these indicators myself and cannot attest to their validity, but it is something that is worth looking into:

http://www.zerohedge.com/article/rydex-market-timers-amazing

http://thetechnicaltakedotcom.blogspot.com/2010/01/rydex-market-timers-long-term-view.html

These articles seem to be looking at assets, not prices, but I assume you could look at prices as well. Just some food for thought for the modelers out there.

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