MARKET ANALYTICS TEAM, MARCH 24, 2017
Invest Up Sentiment Indicator for Crude Oil - GREED
The Invest Up Sentiment Indicator for Crude Oil declined in March. The indicator now stands at 89.04, down from 100.00 in February.
Rated GREED, the current value of 89.04 indicates excessive optimism in the crude oil market.
The indicator is designed to enable investors to detect irrational greed and fear in the crude oil market. Empirical research shows that one of the best ways to forecast whether crude oil will go up or down is to assess whether investors are excessively bullish or bearish. Extreme bullishness and extreme bearishness is often followed by a strong price movement in the exact opposite direction.
Quoted as a value between 0 and 100, a figure under 30 is rated FEAR and associated with excesses in bearish sentiment resulting from investors' fear of uncertainty. On the other hand, a value higher than 70 is rated GREED and associated with excessive bullishness and greed in the crude oil market. Historically, the GREED and FEAR ratings have had strong correlations with turning points in the crude oil market. A rating of GREED, indicating excesses in bullish sentiment on the part of most crude oil 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 crude oil market and an upside reversal.
Using the indicator as a guide, investors will be able to dynamically adjust exposures in crude oil, tactically avoid long positions when the market appears overbought, and enter the market when the indicator signals an attractive buying opportunity.