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Investors Intelligence Market Timing Indicators Work Again
Investors Intelligence is here to give you a framework for market timing. In the last 18 months there have been two substantial market sell offs; 20.2% in the 4th quarter of 2018 and 35.4% in the 1st quarter of 2020. In both instances, our broader market timing indicators gave advance warning of a likely correction, and captured the two major turning points in the S&P 500. These market timing indicators, which include Breadth Measurements, Advisors Sentiment Readings and Buy/Sell Climaxes are very powerful when used in conjunction with each other. We also demonstrated the practical advice through our Model Portfolio positioning.
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4th Quarter 2018

Chart 1: S&P 500 
•  Market rallied 50% from previous low at the end of 2015 into a high in September 2018. 

•  Low point in Market.

Market Timing Indicators
The 30-wk breadth measured  75.2 at the high and bulls registered over 60% (see two charts below), so clear warning signals given.

Chart 2:  Breadth Measurement
•  In September Breadth was 75.2

•  The low point of the market was found when the breadth registered a reading of 5%, indicating an oversold condition that almost exactly corresponded to the low point in the market similar to market sell-off period in 2016.

Chart 3: Bull/Bear Difference
In September Bullish Advisors registered 60%, historically an extreme warning signal. Subsequently, the market fell very sharply and actually bottomed out when bearish advisors exceeded bullish advisors at the lows.

So our Advisors Sentiment readings gave both a buy and sell signal at the correct moments.

Chart 4: Buy/Sell Climaxes
•  The selling climax at end of 2018 corresponded with the correction low in the S&P 500.

When the market had fallen sharply, our Buy/Sell Climax Indicator registered a strong "Selling Climax" signal, which called the end of the down move, in conjunction with the extreme readings registered on the Advisors Sentiment and Breadth.
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1st Quarter 2020

Chart 1: S&P 500 
•  The market rallied sharply to a new high in February 2020

•  Low point in the market.

Chart 2:  Breadth Measurement
•  In September Breadth was 85%, an extreme reading

•  The low point of the market was found when Breadth registered a reading of 5%. This reading also exactly corresponded to the low point in Breadth after the market sell-off in 2016.

Chart 3: Bull/Bear Difference
In January, 2020 Bullish Advisors registered 60%, historically an extreme warning signal. Subsequently, the market fell very sharply and actually bottomed out when bearish advisors exceeded bullish advisors at the market lows. 

So our Advisors Sentiment readings gave both a “sell and a “buy” signal at the correct moments.

Chart 4: Buy / Sell Climaxes
When the market had fallen sharply our Buy/Sell climax indicator registered a strong Selling climax at end of March 2020, which corresponded with the rally from the low point at 2400 in S&P.

Selling climax signal which called the end of the down move together with the extreme readings on the advisor sentiment and breadth.
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How to use Investors Intelligence Advisors Sentiment Survey
- a contrarian stock market indicator
Please watch our explainer video of the Advisors Sentiment Survey in relation to stock market bottoms over recent years. Click the below button to watch the full video.
Click here to watch the full video
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