Investor Psychology Has Dropped to P5

As you know, our Psychology Composite includes about 100 different "emotional" indicators that have proven to have a statistical correlation to impending stock market action.  It includes areas such as bank sentiment, consumer confidence, insider sentiment, leveraged investments, option activity, surveys of investor sentiment, technical indicators, trading data and volatility.  We monitor this data daily, and the zones of P5 and P6 occur when the condition of the above composite drops into the bottom 20% of historical occurrences. 

Today, as you can see below, our Psychology Composite has dropped to P5.


Also, our ValueLine Appreciation Potential indicator has recently provided us with an important signal, as it has moved into the lowest 20% of Appreciation Potential.  This indicator has a certain amount of analyst expectations built in, and while we don't normally like to depend on something with a chance that emotional bias can distort readings, this indicator has an outstanding historical record.


Remember, we depend on history, and history shows that the rally can continue, but with today's conditions, it pays to increase your level of caution in the short-term.


Don Hays 

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