iVIEWMarkets Sentiment Index

First let me stress, most investors should not be trying to time the S&P 500 as a strategy.  In my humble opinion, investors should remain in the market for as long as possible and try to be as passive as possible. The more trading = more losses, bottom-line. However, with that being said, whether you are managing a portfolio or actively trading, we must be aware of the Macro trend, in this case the S&P 500’s trend.

Why do I care about the MACRO Trend

Most large and mid cap securities that investors are allocated to are in the S&P 500.  That means they are highly correlated to the S&P 500 and are at the whim of the indexes direction.  It’s a rare occurrence for a security’s correlation to break down away from the index if the index corrects.  Of course defensive stocks could potentially see this auto-correlation as investors seek safety.

Investors need a road map of the trend of the S&P 500 to allow for a process to better manage risk and security selection. You must ask yourself where is the S&P 500 in terms of trend strength in order to solve the answer:  1. Should you be allocating new capital  2.  Should you be underweight equities 3. Should I be reducing equity exposure, or hedging if you are a portfolio manager.

iVIEWMarkets Sentiment Trend Score

The iVIEWMarkets Sentiment Trend score is a composite blend of a reactionary trend and counter trend model ideal for 90 to 300 day trends.  It can provide a good visual road map for reducing equity exposure during the heightened expended periods above a .80 and potential for strong counter trend rallies below -50.  Here is an example below of the history of the model going back to 1993.