Checking Up on a Few Psychology Indicators

Today, I want to quickly look at two charts.  As you review both of these charts, step back for just a second and look at the volatility of the signals.  They have been very accurate and timely in their signals, but you can see that they are also very dynamic.  They do oscillate depending on what happens in the market, which we find with many of our Psychology indicators.

First, the Gambill Insider Ratio below shows the corporate insiders are reading all this news and seeing the consumers back off from their prior spending binge, so now, we find them clearly in the red zone, meaning they are selling more of their stock than they are buying.

Next is one of our indicators that has foretold in the past what the smart big money option traders are doing.  When these "traders" are buying puts, or hedging a lot, you see this indicator move up into that red zone.  When they reduce their put/call ratio that means they are getting more positive on the outlook.  You can see that they have been sometimes in the red zone, but now are actually getting more bullish - still neutral, but not in the all-out cautious state.  This is a good sign, and also from past history we know this indicator is somewhat longer-term in scope.

I can show you a lot of other Psychology indicators, and most of them like the first two have moved into the cautious zone.  But most of them also do oscillate a little more, and are a little shorter-term in nature.

Don Hays

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