Peace dah.,
here's a nice writing on how FA & TA & Sentiments were combined
Investor sentiment is at its lowest since 1990 and second lowest since the
American Association of Individual Investors (AAII) sentiment indicator began
in 1987. On 2/7/08, the 8-week moving average bull/bear spread reached the low
of -25% and has since hovered below -20%. What does it mean for investors that
the bull/bear spread stands at -25%? And what is the bull/bear spread?
Are you bullish, bearish, or neutral?
Thats the question asked by the AAII who has been conducting weekly
market-outlook surveys of its members since 1987.
The bull/bear spread is the bullish percentage of the answers minus the
bearish percentage of the answers. For instance, if 30% are bullish, but 50%
are bearish, then the bull/bear spread would be 30%-50%=-20%. Since investor
sentiment is very votalile, the 8-week moving averaging is used to smooth out
the kinks. The AAII has 20 years of data with which we can study the
relationship between investor sentiment and stock market return.
Current low investor sentiment is significant because there were only six
instances (excluding this one) when it was below -15%. And only two instances
when it was below -20%.
How does bearish investor sentiment relate to stock market return?
I used the small sample of six prior occasions when the bull/bear spread was
below -15%. I then studied the subsequent one-year returns by the S&P 500 and
the Fama/French Small Cap Value Benchmark Portfolio. The result is displayed in
the table below.
Time (8 weeks ending on )
8 week MA bull/bear spread
S&P 500 one year return
Small Cap Value one year return
11/2/1990 -37% 25% 46% 2/7/2008 (this time)
-25% ?% ?% 10/23/1992 -21% 12% 40% 3/13/2003 -18% 40% 82%
7/2/1993 -15% 0% 11% 7/20/2006 -15% 23% 23% 3/16/1990 -15% 9%
-2% Average -20% 18% 33%
Data sources: AAII, Kenneth French data library
History shows that the worst decline is over once the indicator shows a
reading of -15% or below.
One-year returns for the S&P 500 ranged from 0% to 40%, while those for the
Fama/French Small Cap Value Benchmark Portfolio ranged from -2% to 82%. To the
extent history repeats itself, the risk rewards of stock investing is heavily
skewed toward rewards.
Warren Buffet put it best when he said: Be greedy when others are fearful.
er1ck <[EMAIL PROTECTED]> wrote:
ya itulah bedanya kang, klo org yg udah biasa ningali valuation FA,
ya biasanya kutub utara vs selatan dengan penganut TA, saya mah mendukung neng
EL aja deh, index akan toel2x ke dua rebuu , kasih disc lagi ke 1.800 buat
margin error-nya :-D in this year.
Namanya jg ngayal ...disclaimer o-on always , he3x...
On Tue, Apr 8, 2008 at 11:08 AM, kang_ocoy_maen_saham <[EMAIL PROTECTED]>
wrote:
Its Definitely Not 3-5 Years Bro., How Long Had U Been On JSX??
hehehe.. experience our cycle from 2001??
I do, I was HighSchool at those time., 2001 was my first market
experience. and as far and little as i learn, Patience and Pricing
Really Do "Essentials" on surviving the market. dan Gak harus SUPER-
LONG-TERM jg.
.............
let alone 3 years
wanna play Guess and Figure on end-2008 Stock Prices??
Convince me that "Valuation-doesnt-matter" will ya..
Of Course Not on Interest-Sensitive-Sectors. how about sectors that
had been the 3 cylinder of our Index engine. Plantation, Mining and
Energy. put up ur end-year price tag and ill put mine. we shall see
whether valuation would prove to be essentials or not on 6-10Months-
span.
"You make most of your money in a bear market, you just don't realize it at
the time, because you're able to buy good bussiness at cheap prices. And
although it doesn't feel good because of the uncertainty, this is when the
opportunities are best."
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