Stock market sentiment
indicators are designed to measure any of a number of
market characteristics with the objective of helping you
determine the market's probable future direction and
helping improve your
investment performance. Although there's no shortage of
Stock Market Sentiment Indicators available online, actual trading examples
are rare and typically don't demonstrate
trading proficiency over long periods of time. However,
occasionally a technical author will put an indicator to
the test, as was done by: (1) Rob Hanna in "A Look At The S&P 500 Death Cross"
where his tests of the famously hated
Death Cross Indicator
show it has
erratically poor performance, and (2) Steve LeCompte in
Investor Sentiment as a Stock Market Indicator" where tests of the
Sentiment Survey shows it has great hindsight
correlation, but is
negatively correlated to future returns.
This page was designed to provide; (a)
free daily charts for
nine of the better market sentiment indicators, and (b)
provide comparative testing of them over multiple
decades with three different asset class strategies.
While some of these indicators are available through
SectorSurfer's StormGuard option, others are included
because of their notoriety, despite their comparatively poor
performance. These indicators were
developed to measure and react to the market in
different ways, such as; maximum return, maximum safety,
fast reaction, or Nasdaq vs. NYSE, but none come
close to the performance provided by
Sentiment & Direction Indicators - Daily Charts
Adds Momentum, Sentiment and fuzzy logic analysis to StormGuard-Standard.
triggers month-end only.
Same as StormGuard-Standard with a 3x acceleration when
rebounding from a crash. SG triggers any day.
Double EMA 50-day of daily returns (x21), offset by .55%.
SG triggers month-end only.
• Market Momentum:
A component of StormGuard-Armor.
Double EMA 50-day of daily returns, modified by
relative daily volume.
A component of StormGuard-Armor. Double EMA 15-day of ratio
adjusted new highs and new lows.
The classic S&P500 SMA 50/200-day price crossover going
down or up. SG triggers month-end only.
• Dr. Don's Double Cross:
The EMA 75/300-day crossover for market exit, and the
50/200-day for entry. SG triggers month-end only.
SwanGuard: Based upon VIX market volatility, SwanGuard augments StormGuard by reacting to sharp market drops and volatilty spikes.
• Delta Market Sentiment: The position of ~3,600 stocks relative to a
medium-term moving average. SG triggers month-end
Sentiment & Direction Indicator Comparative Performance
In the table and charts
below, the performance of seven stock market sentiment
indicators is evaluated for each
of three major classifications of ETFs (broadly
diversified, US sectors and world regions). These
indicators are meant to determine whether it is a bull
market (risk-on) or a bear market (risk-off). During a
bull market the Strategy
selects the trend leader to own at the end of each month from among the
ETFs. During a bear market, the Strategy will either
move to the safety of CASH or alternatively own a
long-term treasury ETF, depending on its configuration.
Performance for both of these Bear Market Strategy
configurations is detailed below. Please review the
Bear Market Strategies page for a
discussion on how hindsight selection bias can be
avoided during bear markets using a well-designed
Strategy that selects from a diverse set of asset
classes that often (but not always) do well during a
• US Diversified ETFs Strategy
True Sector Rotation Strategy using IVE, IVV,
IVW, IWB, IWV, RSP, SPY, SPYG, MDYG and MDY.
(TLH bear symbol)
• ETF SPDR Sectors Strategy
True Sector Rotation Strategy using XLE, XLF, XLK,
XLI, XLP, XLV, XLY, XRT, XHB, XPH, MDY and SPY.
(UST bear symbol)
• ETF World Regions Strategy
True Sector Rotation Strategy using DGT, EEM,
EFA, EPP, FEZ, IEV, ILF, IOO, MDD, MDY, SPY and QQQ.
(TYD bear symbol)