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Last UpdateWed, 26 Apr 2017 3am

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Sentiment Indicators

Despite the changing world of the financial markets, the importance of human emotions remains the same throughout the various stages of bull and bear markets. The two basic emotions in financial speculation are greed and fear. Prices themselves are results of where collective psychology lies in the never-ending oscillation between these two emotional stages.

Our research shows that one of the best ways to forecast whether the markets are headed up or down is to assess whether investors are excessively bullish or bearish. Extreme bullishness and extreme bearishness have foretold key turning points in asset prices for centuries. The reason why this relationship exists is fairly simple. If the preponderance of investors is either very bullish or very bearish, this most likely means that market prices have already fully reflected sentiments about the underlying fundamentals. This is one of the essential elements of investing, and it can be applied to virtually every market.

The Invest Up Sentiment indicators ™ are designed specifically for investors to detect irrational bullishness and bearishness in the markets. Historically, the GREED and FEAR ratings have had strong correlations with turning points in the markets.

A rating of GREED, indicating extreme bullishness on the part of most investors, often leads to a market top and reversal. Similarly, a rating of FEAR, indicating extreme bearishness on the part of most investors, often leads to a market bottom and reversal. The fact that the indicators are expressed in a range between 0 and 100 allows them to be easily distinguishable and comparable to previous highs or lows regardless of time. Using the indicators as a guide, investors will be able to dynamically adjust exposures across asset classes, tactically avoid markets which are overbought, and invest in markets where the indicators signal attractive buying opportunities.