Smart Money More Confident

We haven't looked at sentiment data since earlier this year when dumb money sentiment was very high and smart money sentiment was low.  At that time we said the risk/reward setup was not favorable based on historical precedent.  

The most recent sentiment data from our friend Jason Goepfert at SentimenTrader.com shows just the opposite occurring today. The smart money is becoming more confident as the market moves lower while dumb money is becoming less confident.   

While markets can continue to move lower in the near term, when smart money confidence rises close to or above 70 (which it rarely does), the risk/reward setup is extremely favorable for investors in the short to intermediate term.  And of course, one wants to act in concert with smart money investors, even when emotionally it doesn't "feel" right.  We believe more downside action in the indices, coupled with higher smart money confidence readings will likely provide solid, low risk, opportunities.