Thursday, February 7, 2013

All-Time High Newsletter Sentiment: Poor Returns Next 1-6 Months

From the excellent site SentimenTrader:

“The survey of investment newsletter writers from Hulbert Financial Digest is theoretically better than most, since it focuses on actual trading recommendations instead of sometimes-ambiguous opinions.”

“There have been a total of 9 weeks when the combined level neared 70% (a couple of them were clustered together).  A month later, the S&P 500 showed a negative return every time, a median of -3.1%.  Its maximum gain during the next month averaged only +0.1% (using weekly closes) while the maximum downside averaged -4.4%.
Even over the next six months, returns were poor.  Only 1 of the 9 weeks had a positive return (+1.9%), and the median was -4.25%.  The most that the S&P rallied during the next six months averaged only +0.7%, while its maximum decline averaged -13.8%.”