Investor Sentiment Survey Defies Stock Market Crash Outlook


Investor Sentiment Survey Defies Stock Market Crash Outlook


Investor Sentiment Survey: Market Dynamics in Flux

Updated Feb 28, 2024

 Our voyage will commence in the present, and as we delve into history, we’ll unveil the profound significance of investor sentiment surveys as indispensable instruments for informed decision-making. We will distinguish historical comments from current ones by including relevant dates to enhance clarity and understanding. This approach will offer a comprehensive perspective on our insights and potential future trajectories. Join us as we embark on this fascinating journey through the annals of investor sentiment.

The sentiment indicators have returned to their average levels. While they are not the exclusive constituents of Mass Psychology, their integration into several of our tools underscores their pivotal role. Essentially, this signifies that Mass Psychology is poised to take the lead. The prominent actors have effectively persuaded many technical analysts and the general public to abandon caution and ardently pursue the next significant trend, regardless of the cost. Consequently, technical analysis and fundamental metrics will not yield the same effectiveness as in the past 12-16 months.

Anticipations point toward the markets entering a phase of dissonance or, in simpler terms, chaotic trading. It’s an apt moment to recall that when a rally, akin to the one observed in the Nasdaq and AI stocks, reaches its zenith, it is typically followed by a substantial decline. Hence, exercising caution is advisable. Nevertheless, there is a notable exception in this scenario. Given the unique nature of this concentrated rally, only the overheated sectors and indices are expected to bear significant impacts. Sectors outside the high-tech domain and indices, such as the Russell 2000, SP400, and, to a lesser extent, the Dow Jones, may undergo milder declines.

Investor Sentiment Survey: Drawing Parallels with Past Events

Updated July 2023

In the fast-paced world of stock markets, history seems to repeat itself, yet we fail to heed the warning signs. The dot-com bubble, the housing bubble, and the patterns observed in 1973-1974 all share eerie similarities with the present situation. However, the prevailing belief is that this time is different, as we heard during the housing crash. Past markets peaked in 2007, experiencing a strong rebound in 2008 that deceived many, much like the current scenario. The subsequent drop in 2009 shocked those who had entered during the rally, causing them to stay away from the market for years.

Present Market Realities: A Mirror Image of the Past

Today, the number of individuals investing in the market is rapidly approaching the levels seen in 2008, with over 61% actively participating. Astonishingly, even a significant portion of individuals over 85 are nearly fully invested. The bullish readings have now hit the 50 mark, marking five consecutive weeks of surpassing the historical average of 38.5 after trading below this threshold for 18 months.

A Lesson from Scarcity: The Mindset of Today’s Investors

Let’s explore a real-life illustration of the collective mentality at play. The scarcity of sriracha hot chilli sauce has led to soaring prices, with some bottles reaching over $70 on the secondary market. The high demand for this popular sauce, lasting for more than a year, has enabled resellers to take advantage of the situation, selling bottles at even higher prices on platforms like Amazon and eBay. This scarcity-driven mindset misclassifies desires as needs, and price becomes irrelevant until financial resources are depleted.



Unveiling the Stock Market Prospects

March 7, 2023

Navigating through periods of capitulation and despondency, akin to the 2008-2009 financial crisis, requires patience and discipline. The market’s decline back then caught many investors off guard, as they prematurely believed it had bottomed out in mid-2008, only to witness further plummeting until March 2009, when pessimism peaked. This cautionary tale serves as a reminder of the importance of patience and discipline when investing, as they complement each other in achieving success.

While our latest update didn’t provide specific targets for the SPX, let’s focus on the NDX, an extension of the Nasdaq. The NDX (Nasdaq 100) has the potential to test the range of 13,600 to 13,800, possibly surpassing to reach 14,160. However, the NDX must maintain a daily close above 11,960 to validate this outlook. If the NDX accomplishes this, other indices will likely follow suit, resulting in a rally lasting two to three weeks, with a potential extension of up to four weeks.



2020 Stock Market Crash Outlook

Vast amounts of liquidity are already being added to this market, but you have seen nothing yet. Helicopter money is about to become a reality, and regardless of the mantra, it’s different this time; nobody can fight a fed that is determined to unleash the mother of bailout packages.

It appears that markets are experiencing the “backbreaking correction” that every bull market experiences at least once and is often mistaken for the end of the bull.  In today’s manipulated markets, one cannot tell which correction will morph into a backbreaking correction, as free-market forces have almost been eliminated from today’s markets.  While it feels like the world’s end, such corrections always end with a massive reversal.  Given the current overreaction to the coronavirus, there is now a 70% probability that when the Dow bottoms and reverses course, it could tack on 2200 to 3600 points within ten days. Interim update March 9, 2020

Exciting readEconomy: Exploring Different Economic Systems

A Once-in-a-Lifetime Buying Opportunity

Based on our indicators, the markets were expected to release some steam. Still, mass hysteria turned a normal correction into a bloodbath in the short-term timelines and a generational buying opportunity when viewed from a long-term perspective.

Typically, the markets would pull back sharply and then tread water until our indicators moved into the highly oversold ranges. If the sentiment is still trading in the maddens zone when our technical indicators hit the highly oversold ranges, there is a 90% chance it will trigger the father of all buy signals.

There is one massive indicator validating the outlook that this current makes for a great opportunity. It’s insider activity, and the readings on this indicator are off the charts.

Insiders’ Strong Buy Activity: A Bullish Signal for Investors

Insiders are taking advantage of the significant market pullback by purchasing shares, and the sell-to-buy ratio measures the intensity of their buying. Typically, a reading of 2.00 is considered normal, while a reading below 0.90 is considered exceptionally bullish. The sell-to-buy ratio is at a staggering 0.35, indicating that insiders are aggressively buying shares.

The latest readings indicate that Vickers’ benchmark NYSE/ASE One-Week Sell/Buy Ratio is 0.33, while the Total one-week reading is 0.35. These numbers demonstrate that insiders are not only purchasing shares but doing so with great enthusiasm. Similar buying patterns were observed in late December 2018 after the stock market crash on Christmas Eve, in early 2016 during a market correction and in late 2008/early 2009 during the depths of the Great Recession. These periods were considered exceptional opportunities to invest in stocks. Insiders seem to be suggesting that the current situation presents a similar opportunity.


 The Ever-Repeating Story of Market Bubbles and the Power of Contrarian Thinking

Learn the essential lesson every new subscriber must grasp as we explore mass psychology in the stock market. In a world where following the crowd often leads to bitter outcomes, we uncover the dangers of blindly following popular sentiment and the rewards of embracing significant pullbacks.

Navigate the challenging waters of market volatility, especially during the turbulent September to October period, when the crowd’s reactions to news can be disastrous. Discover the truth behind every catastrophe-turned-disaster, where false narratives mislead the masses. If disasters were profitable, wouldn’t the Dow be closer to zero than breaching 36K?

Embrace a fresh perspective and empower yourself to go against the crowd. Explore the stock market as a gauge for disaster-prone situations, unveiling the secrets to successful investing amidst the ever-changing tides of market sentiment.

October 2019 Stock Market Snapshot: Unveiling Trends and Insights

Once again, we witness in real-time the wisdom of buying stocks when the masses are gripped by panic. It is during these moments that astute investors discover genuine bargains. Patience is crucial in waiting for these opportunities and, more importantly, taking action when they arise. A similar situation unfolded during the period from October 2018 to January 2019. However, as is often the case, most investors will succumb to panic and flee despite eagerly seeking a chance to invest in the stocks they were abandoning just under two weeks ago.



Investor Sentiment Survey Challenges Market Crash Predictions

While the action has been restricted to the upside, the same cannot be said for sentiment readings. The moves have been wild for the past four weeks, and this trend appears to be gaining traction.  The number of bulls this week surged to 47%, and the number of neutrals and Bears experienced a sharp drop. Additionally, there was a sharp move in our anxiety gauge. Market Update Nov 2, 2017

Despite the tall tales often told by experts like Marc Faber regarding the impending stock market crash, there is no substantial evidence to support such baseless assertions. One of the most crucial factors indicating the longevity of a market is investor sentiment. As the crowd is far from euphoric, it suggests that a market crash is unlikely to occur. However, a correction is possible due to the markets being significantly overbought.

Therefore, if the markets experience a temporary pullback, it is important not to panic but instead consider such sharp declines as positive developments. These pullbacks allow the markets to release built-up pressure and regain a more sustainable trajectory.

Investor Sentiment Not Supportive of a Stock Market Crash

The market has not let out a decent dose of steam for some time, but when a market is trading in the overbought ranges, it is generally prudent to wait for the market to let out a decent dose of steam before opening long positions in the major indices. The other option is to establish positions in stocks that are trading in the oversold to extremely oversold rangesMarket Update Nov 2, 2017

We told our subscribers back in November, and those views still hold. While the markets are overbought, investor sentiment trades in the oversold ranges. Most Investors have not embraced this bull market; until they do, it will not crash. Therefore, all strong pullbacks should be viewed through a bullish lens.

Compile a list of stocks you would love to own at a discount. When the market’s pullback jump in and buy them.  Alternatively, you can look for strong stocks that have pulled back and deploy 50% of your capital into them.

Investor Sentiment Analysis

Investor sentiment has a long way to travel before it hits the Euphoric zone, so don’t listen to the naysayers who love creating a mountain out of a molehill. These charlatans delight in convincing the masses that the markets are ready to crash the moment they start to let out a bit of steam.

As the markets are extremely overbought, investors should not be surprised if they let out some steam. At this point, it would be better if they shed a hefty steam dose.  If this scenario comes to pass, use it to open up positions in solid companies.


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