Market SentimentAs I have mentioned in numerous posts over the past couple of weeks, the market sentiment was in the Excessive Greed position. In these posts, I advised that it is rarely a good thing to put new money into the market at these times. I must admit that this time around, the market stayed in this category much longer than normal and so while I was overweight cash (even for scenario for a recession in a quarter or two), I did miss out out on some of the higher equity prices.
The market now appears to be turning as the pros have brought the sentiment down a notch to the Greed category. Seeing this turn in real time, I increased my cash position further. If the sentiment indicator does what it normally does, we will see the market drift lower until the sentiment is at least in the normal category and depending on how the pros want to play it, it could go into the fear category which is normally a great time to be a buyer. Should it get into the fear category, I will temporarily underweight cash and move to normal as the sentiment rebounds back to normal and then overweight if it gets back to the greed category.
We will see how this plays out over the next week or two.