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Long Term Composite Indicator Hits Extreme at Trader’s Narrative

The Investor’s Intelligence Long Term Composite Indicator is a proprietary indicator generated from the scores awarded to over forty indicators. These indicators have been selected across a wide range of disciplines covering index trends, breadth, sentiment, money-flow and financial/economic factors. The scores awarded to each indicator are weighted to create an indicator that generates signals at market extremes…

long term composite indicator jan 2008

The last time this aggregated indicator reached similar extremes were in August 2007, summer of 2002, and October 1999. So although the II sentiment measure is stubbornly stuck in bullish mode, their Composite indicator is most definitely flashing a buy signal.

My guess is that it is because of the rapidity of the decline as well as the low bullish percent indices for so many sectors.

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3 Responses to “Long Term Composite Indicator Hits Extreme”  

  1. 1 Steve

    The momentum indicators that I follow are also moving nicely off their extreme lows. For the short term, the momentum is definitely turning to the upside. I don’t really care about the whys or wherefors of the markets direction. Nobody ever has the right explanation except way after the fact, so I just follow the trend. Check out my website if you want to see what I am tracking.

  2. 2 Keith Shepard

    Interesting that many longer and mid-term indicators are all pegging their extremes at this point. Dr. Brett Steenbarger passed this short article along through Twitter that I thought was interesting statistically:

    2008 Marks Worst Market Start on Record

    Below we provide an updated list of the worst starts for the S&P 500 (through 1/25) since 1929, which is as far back as we have data. As shown, 2008 is currently the worst start ever for the S&P 500. On a brighter note though, in each year where the index was down more than 5% through 1/25, the performance from 1/25 through the end of the year was positive every single time with an average gain of 7.26%.

    (Bold mine.) Hmmm….

  1. 1 Tuesday links: moderating moderation « Abnormal Returns

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