MARKET ANALYTICS TEAM, MARCH 24, 2017
Invest Up Sentiment Indicator for the Commodity Composite - NEUTRAL
The Invest Up Sentiment Indicator for the Commodity Composite fell in this month. The indicator is now at 64.83, down from 66.74 in the previous month.
Rated NEUTRAL, the current value of 64.83 indicates relatively calm sentiment in the commodity market.
The indicator is designed to enable investors to detect irrational greed and fear in the commodity market. Our econometrics research shows that one of the best ways to forecast whether the commodity composite will go up or down is to assess whether investors are excessively bullish or bearish. Extreme bullishness and extreme bearishness often lead to major market tops and bottoms in the commodity composite.
The indicator moves between 0 and 100. A figure below 30 is rated FEAR and associated with excesses in bearish sentiment resulting from investors' fear of uncertainty. On the other hand, a figure higher than 70 is rated GREED and associated with excessive bullishness and greed in the commodity market. Historically, the GREED and FEAR ratings have had strong correlations with turning points in the commodity market. A rating of GREED, indicating excesses in bullish sentiment on the part of most commodity investors, often leads to a topping in the market and a downside correction. Similarly, a rating of FEAR, indicating high pessimism on the part of most investors, often leads to a bottoming in the commodity market and an upside reversal.
Using the indicator as a guide, investors will be able to dynamically adjust exposures in the commodity composite, tactically avoid long positions when the market appears overbought, and enter the market when the indicator signals an attractive buying opportunity.