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Investors are Not Buying the Stock Market Rally

Stock-Markets / Stocks Bear Market Jul 26, 2009 - 08:13 AM GMT

By: Guy_Lerner

Stock-Markets

Best Financial Markets Analysis ArticleThe "Dumb Money" indicator is shown in figure 1. The "Dumb Money" indicator looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio.


Figure 1. "Dumb Money" Indicator/ weekly

As investors are not buying into the rally, one might conclude that the rally will march onward and upward until they do, and then it will rollover. That seems likely. However, it is hard to imagine that prices will continue making gains at the pace seen over the past two weeks. I still stand by the sell signal and expected spike in prices that I wrote about two weeks ago. The recent "breakout" in prices will eventually be seen as a better time to sell rather then a new launching pad for a bull market. That's how I see it for now.

The "Smart Money" indicator is shown in figure 2. The "smart money" indicator is a composite of the following data: 1) public to specialist short ratio; 2) specialist short to total short ratio; 3) SP100 option traders. The "smart money" is neutral.

Figure 2. "Smart Money" Indicator

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2009 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Guy Lerner Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

TraderJoe
26 Jul 09, 12:58
Expeced Spike?

Heres what you wrote on the 12th -

So what's next for investor sentiment? Unless this turns out to be a bull market (and I have expressed my doubts since the start of the rally on March 9), the most likely course is for the "Dumb Money" indicator to cycle into a bearish extreme (i.e., bull signal) over the next couple of months. And there are only two ways to get more bears: 1) we either have a protracted trading range that wears the bulls down; or 2) we have lower prices.

Nothing implies you were expecting a spike, the opposite infact


Mark L
26 Jul 09, 23:32
Dumb Money

Fantastic quote...

"As investors are not buying into the rally, one might conclude that the rally will march onward and upward until they do, and then it will rollover."

Rest of the article was not worth reading but that quote was true wisdom born of sarcasm and the author was completely oblivious to their own genius. Hence, this was not genius - the genius is to recognise the quotes truth.


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