Thursday, May 17. Seriously? Is this a big buying opportunity? This just came at me out of the clear blue…
“Sentiment has dropped to a rare level since the 2009 low,” Jason Goepfert wrote to his SentimenTrader customers last month.
On a scale of 0 to 100, investor sentiment sat at just 5, according to Jason. (That was as of April 13. It’s moved up a bit since then… but with the new reading at just 16 out of 100, it’s still pretty extreme.)
My jaw dropped when I read this. I never imagined that we could be nine years into a great bull market, and stocks could be THIS hated.
Jason’s scale comes from his “Advisor and Investor Model” – one of his key indicators. It is primarily built on surveys of investors and advisers.
The recent reading of 5 out of 100 means investor sentiment has been downright terrible lately, according to the surveys.
So… is this useful information? It is…
This indicator has only been below 10 just 14 times over the past 20 years (that’s excluding overlapping occurrences). The average gain just three months later was 8.5%… And stocks were higher 13 out of 14 times three months after it hit an extreme like we saw in April.
Eight percent gains in three months might not sound like much… but that’s a 39% compound annual rate of return. It’s hard to find any investing technique that comes close to gains like that.
When we talked about this recently, Jason told me that whenever you have extreme pessimism along with an uptrend – like we have today – the implications are really good for “at least the next several months.”
At this moment, stocks are hated, and they are in an uptrend. Chances are good we won’t see this moment again in this bull market.
To me, this moment is likely a great buying opportunity.”
I (Harold) had identified a “lo-risk market entry opportunity” just about 6 weeks ago… and, I stepped up and was buyer, Big Time! I put a lot of our long-accruing cash to work, and… more importantly, I pushed our anticipated portfolio dividend income level up to 94% of the way to our goal. I fully expect to do a little more buying here soon, just to get us another percentage point, or maybe 2, of the rest of the way to our goal. I’ll tell you all about, right here, when I do.