Sentiment investing: Mass Psychology Holds the Key

Sentiment investing

Sentiment Investing: The Key To Long Term Financial Success

How can anyone explain the Sentiment data above using old school logic? You can’t. As we stated in the last update only in the twilight zone, does a negative sentiment surge while the markets are trending higher. Market Update July 31, 2020

What is even more remarkable, and would fall under the category of “unimaginable” only a few months ago is that the bullish sentiment is trading below its historical average. Consider this for a moment, the Nasdaq is trading at new highs, the Dow has recouped most of its losses and will take out its old highs sooner or later and yet the bullish sentiment is at levels one would associate with a severe correction. It’s time to keep notes, for this is the only way one will be in a position to understand what is yet to come. The “market of disorder” is going to drive everyone insane; by everyone, we refer to those that refuse to accept that the old way of doing things (90% of players) is dead. We are warning all our subscribers early on in the cycle, the cycle of insanity has just begun, so be prepared for things you would have once deemed unimaginable to come to pass.

Bullish sentiment is low because the Masses Think they know better

However, the Fed knows better, and there’s only one reason for this; they control the strings to the purse, and anyone that has that kind of power can alter and redefine reality. Regardless of all the rubbish, the experts might claim as to the Fed overplaying its hand, and that the Fed is running out of power; take those statements with a barrel of salt and jar of whiskey. For at best, they are worthless and at worst a member of ward 12 could come up with a better projection. Remember this statement. Oppose the Fed and wind up dead; in this instance, dead refers to dead broke.

Sentiment investing indicates that the Masses are not ready to abandon FIAT

Until the world is ready to give up on fiat and our analysis reveals that at best only 3 to 6 per cent of the populace is willing to do this, fiat is here to stay regardless of the misery it inflicts on humanity. Hence the TI saying, misery loves company and stupidity simply demands it.

Deploy 1/3rd of your funds whenever the Dow sheds 1500 or more points Cumulatively within a 9-day trading period (there are only five trading days in a week). For example, if the Dow were to shed to 1500 points in 3 days, you would put the above strategy into play

Deploy another 1/3rd when the Dow shed 1800 to 2400 points

Deploy another 1/3rd if the Dow sheds 2600 to 3000 points

Deploy one full position (this means three lots) in one shot if the Dow sheds more than 3600 points.

This strategy remains in effect until the trend changes. From time to time, you can write in and request updates. Note this is not an official strategy. It’s a suggestion for the trader that wants to improve their skills and is willing to work independently utilising the above suggestions.

You can buy index-based funds such XRT, QQQ, TQQQ; one can also purchase AI stocks such as GOOGL, NVDA, FB, AAPL, etc.; One can also buy options on some or all of the above the suggested ETF’s and or stocks. Market Update July 31, 2020

The vast majority of subscribers misunderstood the above strategy. They immediately zoomed on the suggested stocks/ETF plays we mentioned. Everyone missed the opening statement which is posted below:

We are going to keep adapting to these changes, but if you are ready to take your game to the next level, then consider putting this strategy into action. Buy regular Index funds, Leveraged Indexed funds or options when the Dow pulls back in the following ranges. Understand that the risk goes up as you move from Index funds to Options. This strategy is for the trader that is willing to do some footwork by utilising our sentiment data, the trend data and any general guidance we provide to enhance their returns further. Market Update July 31, 2020

That statement clearly states this strategy is for the trader that is willing to do some footwork, and for the trader that is willing to take their game to the next level. This implies that one can modify or adjust the suggestions. The suggested list of stocks and ETF’s was not final but an illustration of what an advanced trader could do. Hence, you can get into QQQ, TQQQ, FDN, AAPL, NFLX, NVDA, and any instrument of your choice. We hope that clarifies that point and more importantly, do not try to put strategies into play if you feel uncertain. One should not attempt doing something one is not prepared for, slow and steady is the way to begin, and that will morph into swift and ready.

Sentiment Investing conclusion

Every other index is now playing catch up to the Nasdaq; in a way its sort of like the dogs of the dow theory, that inadvertently states that every dog will have its day in the sun. Another reason that the Dow is lagging and the Nasdaq is soaring is because the dumb money which is the vast majority of players are still sitting on the sidelines. And to make things interesting, some of the dumb money players have migrated into the smart money crowd, and vice versa as evidenced by the gains so many Robinhood traders have banked. As we stated before, many of these so-called experts will be reduced to nothing for their unwillingness or inability to embrace these new emerging trends. Mutual funds, fund managers and many hedge funds are set to follow in the footsteps of the Dodo or dinosaur. Market Update Aug 11, 2020

The weekly chart of the Dow indicates that the Dow there is enough power for the Dow to rally 2000 points before it hits the insanely overbought ranges. Usually, a market that has to play catchup tends to overshoot its original target. In this case, there is a possibility that the Dow could trade to the 29K plus ranges before our indicators on the weekly charts start to pullback.

As the Dow is all but guaranteed to take out 30K, traders willing to take on some risk could deploy extra funds in thirds (one lot at a time) into DIA 300 Jan 2022 calls (one can aim as high as DIA Jan 2022 340 calls) whenever the Dow pulls back strongly. However, if one is going to use this strategy, then focus on Jan 2022 calls. This strategy is only for the advanced trader and not for novice traders. If the Dow does not take out its old highs, it means that the Fed is allowing free market forces to rule the markets and we all know what will happen if free forces are allowed to dominate; in case you are wondering; the markets will tank, so the odds of the Fed’s taking that stance is very low. Right now the odds of Santa Claus flying over your roof are better. Market Update Aug 11, 2020

So what’s the outlook for Jan 2021

The Gnosis Panopte  Index (for subscribers only) keeps experiencing mini surges. It has experienced three large moves in less than 30 days (a very unusual development as the last time such a wave was experienced over a period of 90 days). If it experiences one more surge, we can state the odds of all hell breaking loose will surge significantly.  The Rage Discontent index (for subscribers only) put a new high and V readings are at an all-time high.

Hence, a strong reaction is all but given, the only question that remains is how strong this reaction will be and will this reaction occur outside or within the markets. Outside the markets, implies massive upheaval; possibly a mini civil war type event. Such an event will eventually impact the markets.  We live in interesting times, and at this stage of the game, it is imperative to take the role of the observer; do not wear your emotions on your sleeves. If you do, it means the emotions are in charge, and you are just a mindless bot, begging for the beating of your life.  The masses are emotional players, and since the inception of time, their only function has been to serve as punching bags and cannon fodder, try hard as you might, it is impossible to change this equation. Still, it is possible to escape the mass mindset if one chooses to do so.

Sentiment Investing Strategies going forward?

sentiment investing Jan 2021 outlook

Bullish sentiment is moving up and down but within a narrow range, which suggests that it could experience a blow-off top somewhat similar to market tops, which inadvertently would indicate that a market top is near. As this is an unusual market, we suspect this Yo-Yo action will continue until Bullish sentiment surges past 60.   Examined from a different angle, Neutral and bearish players still overwhelm the bulls. Hence, the markets are likely to trend upwards until the bullish sentiment score is higher than the combined Neutral and Bearish score.  Market Update Dec 21, 2020

Compared to the sentiment readings in July, the masses appear to be downright bullish at this stage of the game and this generally does not bode well for the masses as they tend to jump in towards the end of the party.  At this point in the game, patience is needed, we locked in massive gains, this year. On the options front, we closed almost a dozen positions with triple-digit gains, with a win ratio bordering close to 84%. Our entire ETF portfolio is in the black and we closed several ETF’s positions with over 60% In gains, with the best position yielding over 100%. On the stocks frontier, our main trend portfolio has a win ratio that is close to 90% with a huge number of plays yielding north of 50%.  So a bit of patience is called for as expect the markets to put in a short term blow-off top; the severity of the correction will depend on the intensity of this last upward wave. If the markets put in a short term of blow-off top then we can expect a stronger downward reaction and vice versa. As long as our trend indicator remains positive and bullish sentiment experiences a sharp pullback, every correction should be viewed as a buying opportunity. We monitor sentiment data every day and pay very close attention to the trend indicator; if we notice any divergence, we will send out an interim update.

We would like to take this opportunity to wish all our readers a happy and prosperous new year.

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