August 24, 2016
Brad Lamensdorf @ Lamensdorf Market Timing Report
Creator and Co-Manager of ETF products
How To Play the Market When Sentiment is Overly Optimistic
The current market environment is as overly optimistic as it was last summer, before the fall and winter corrections occurred. We often utilize sentiment as a contrarian indicator to judge whether the market is overbought. As market experts know…. if everyone has already bought, then who is left to buy? Since current sentiment readings have once again reached lofty levels, the August issue of LMTR will focus primarily on sentiment gauges.
EDITOR:
DICK STERN
CIO:
BRAD LAMENSDORF
AUGUST
2016
+100%
-25%
75%
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The charts and graphs presented in LMTR’s newsletter are not produced by LMTR. The interpretation
of the charts and graphs is only the opinion of LMTR and does not reflect the associated firms’ opinions.
WESTPORT, CONNECTICUT
BRAD@LMTR.COM
1
LAMENSDORF MARKET
TIMING REPORT
The current market environment is as overly optimistic as it was
last summer, before the fall and winter corrections occurred. We
often utilize sentiment as a contrarian indicator to judge whether
the market is overbought. As market experts know.... if everyone
has already bought, then who is left to buy? Since current sentiment
readings have once again reached lofty levels, the August issue of
LMTR will focus primarily on sentiment gauges.
How To Play the Market When
Sentiment is Overly Optimistic
s
s
LAMENSDORF MARKET TIMING REPORT
AUGUST
2016
WESTPORT, CONNECTICUT
BRAD@LMTR.COM
2
Members of the National Association
of Active Investment Managers
(NAAIM) are asked to provide a
weekly number that expresses their
overall equity exposure, which can
range anywhere from 200% long to
200% short. Responses are tallied and
averaged to provide the mean equity
exposure, and this indicator is used in
a contrary fashion. The current reading
of 96 is in dangerously high territory,
indicating that this this is a good time
to hedge.
CNN.com has created an excellent
quantitative sentiment gauge of their
own, incorporating other technical
tools such as sentiment and the
VIX. Note that in January this fear
gauge dipped to a buy level, correctly
predicting February’s low. It has now
reached its highest level in 18 years.
This shows extreme complacency and
is another sign that hedging strategies
should be deployed.
© Copyright 2016, All Rights Reserved
www.sentimentrader.com.
Further distribution prohibited without prior permission.
Copyright 2016 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.
See NDR Disclaimer at
www.ndr.com/copyright.html
. For data vendor disclaimers refer to
www.ndr.com/vendorinfo/
.
LAMENSDORF MARKET TIMING REPORT
AUGUST
2016
WESTPORT, CONNECTICUT
BRAD@LMTR.COM
3
Sentimentrader.com’s smart money/
dumb money confidence gauge is
currently experiencing one of its
largest spreads of the decade. To make
matters worse, the smart money gauge
has plummeted to its lowest level
in years. This is obviously extremely
negative.
Bullish newsletter writers hated the
February bottom and now they are
bullish?
Optimism is back!
© Copyright 2016, All Rights Reserved
www.sentimentrader.com.
Further distribution prohibited without prior permission.
© Copyright 2016, All Rights Reserved
Stockcube Research Ltd.
Further distribution prohibited without prior permission.
LAMENSDORF MARKET TIMING REPORT
AUGUST
2016
WESTPORT, CONNECTICUT
BRAD@LMTR.COM
4
The NYSE high-low indicator is updated
daily. It is a ratio of the number of NYSE
stocks showing new 52-week highs /
sum of total new highs + lows during
a week long period. Chartcraft then
creates a 10-week moving average to
calculate an index that is especially
useful for spotting turns in the market
after it has hit extremes. The present
reading of 93.35 is its highest number
in seven years, placing the market in
overbought territory.
Assessing the volume of mergers and
acquisitions is a useful sentiment
indicator. Typically high volume occurs
at tops, while low volume is present at
bottoms. We are currently experiencing
record volume, showing an overly
optimistic market.
© Copyright 2016, All Rights Reserved
www.thecapitalgroup.com.
Further distribution prohibited without prior permission.
© Copyright 2016, All Rights Reserved
Stockcube Research Ltd.
Further distribution prohibited without prior permission.
WESTPORT, CONNECTICUT
BRAD@LMTR.COM
Copyright © 2016 Lamensdorf Market Timing Report.
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Lamensdorf Market Timing Report is a publication intended to give analytical research
to the investment community. Lamensdorf Market Timing Report is not rendering
investment advice based on investment portfolios and is not registered as an
investment advisor in any jurisdiction. Information included in this report is derived
from many sources believed to be reliable but no representation is made that it is
accurate or complete, or that errors, if discovered, will be corrected. The authors of
this report have not audited the financial statements of the companies discussed
and do not represent that they are serving as independent public accountants with
respect to them. They have not audited the statements and therefore do not express
an opinion on them. The authors have also not conducted a thorough review of the
financial statements as defined by standards established by the AICPA.
This report is not intended, and shall not constitute, and nothing herein should be
construed as, an offer to sell or a solicitation of an offer to buy any securities referred
to in this report, or a “buy” or “sell” recommendation. Rather, this research is
intended to identify issues portfolio managers should be aware of for them to assess
their own opinion of positive or negative potential.
The LMTR newsletter is NOT affiliated with any ETF’s Nor any investment Advisors.
DISCLAIMER
LMTR readers are well aware that the market has been overvalued for quite some time.
This is still the case. However, the ante has been upped now that sentiment has spiked to
overly optimistic levels. It is dangerous for investors to rely on a single poll, which is why
we monitor dozens of indicators and a plethora of market data when analyzing trends.
With an overvalued market and overly optimistic sentiment, we can expect forward
returns to be flat at best. Most likely returns will be negative going forward, which is why
we issued an intra-month alert to LMTR subscribers in July. We advised investors to add
an additional 7.4% of net short exposure, placing us in a -45% short position.
CONCLUSION
Brad Lamensdorf, a seasoned money
manager and market strategist, is the
CIO of The Lamensdorf Market Timing
Report, a newsletter designed to
help investors improve performance
via market timing by assessing the
environment of the stock market using
a variety of technical, fundamental
and sentiment-oriented tools from
powerful independent research firms.
Many investors mechanically enter
and depart the market without a true
“game plan.” Studies have shown that
retail investors, in particular, are very
poor market timers, tending to invest
at or near market peaks and sell at or
near market lows. The newsletter is
designed to provide risk parameters for
both professional and retail investors
around the short-term stock market
environment, giving subscribers better
insight about when to allocate assets
into or out of the equity markets.
Lamensdorf, a frequent guest
commentator and analyst on major
business networks including CNBC, CNN
and Fox Business News, also serves
as a Portfolio Manager and Principal
of Ranger Alternative Management
LP, a sub-advisor to the Advisor
Shares Ranger Equity Bear Exchange
Traded Fund (NYSE: HDGE). In this
role, he conducts top-down technical
evaluations of broader market liquidity,
sentiment and breadth to help identify
short and intermediate-term market
trends, manage exposure and mitigate
risk. HDGE was launched in 2011 and
is the first and sole actively managed,
short-only ETF in existence.
Lamensdorf, also has managed
investment portfolios for the Hughes
family and was principal of Tarpon
Partners, managing a long/short fund
that was up more than 200% gross over
six years. Earlier in his career, he was as
an equity trader/market strategist for
Taylor and Company, the Bass brothers’
trading arm, co-managing a short-only
strategy in a derivative format with
national exposure. He also served as
the in-house market timing strategist
for the entire internal and external
network of Bass managers.
BIO
LAMENSDORF MARKET TIMING REPORT
AUGUST
2016
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