Research Excerpts

Active Managers At 7-Year Bearish Extreme On US Stocks

Posted on: Thursday, October 30th, 2014

The following is a brief excerpt from our October 30th Investor Sentiment Survey which was distributed to Asbury Research subscribers before the US stock market opening this morning.  Investor Sentiment Survey is one of 8 different reports that we provide for subscribers at various intervals throughout the month.

Investor Sentiment Survey is a monthly analysis of a broad list of both asset flow- and survey-based measures of professional and retail investor sentiment, which focuses on their directional implications for the major areas of the US financial markets including the US stock market, US interest rates, the US Dollar, and economically influential commodity prices including copper, crude oil, and gold.

» View Sample Investor Sentiment Survey from Oct 20th 2011


Research Report: Investor Sentiment Survey
Date: October 30th, 2014
Topic: US Stock Market

 

Chart 2 measures investor sentiment according to a daily survey of active Registered Investment Advisors (RIAs) via the NAAIM (National Association of Active Investment Managers) Exposure Index, which is plotted since 2008 by the blue line in the lower panel.

The NAAIM Exposure Index represents the average weekly exposure to US Equity markets reported by their membership.

Chart 2

The highlighted area shows that these intermediate term-oriented professional trend followers are also rising from an historic least bullish extreme on US equities, of just 14% or less, one which has previously coincided with important market bottoms in the S&P 500 (upper panel) in October 2011, June 2010, and November 2008.

We view this metric as corroborating evidence that trend following investors are currently too negative on the US stock market, which history shows is precisely when meaningful bullish price reversals often begin.

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Our investor sentiment metrics reveal how different types of investors are positioned in the financial marketplace, whether it’s the stock market, US Treasuries, the US Dollar, or key commodities like copper, gold or crude oil, and are an important component of our trend model for the US stock market.

When the collective positions of these different investor demographics become diametrically opposed to one another, important and “investable” changes in market direction typically occur. 

A great example of this is our early June report, entitled Oil Prices: Smart Money Skeptical At $103 Per Barrel, which got our subscribers in front of what has thus far been a $19 per barrel, 19% decline in crude oil prices.  At some point in the not-too-distant future, these same metrics will indicate a good opportunity to buy oil and energy-related assets again.

Asbury Research subscribers can view the entire report by clicking here.

Interested professional investors can request a 2-week trial of our entire research service by clicking here and providing your contact information.