“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”, John Templeton
The Sentiment model, an excellent standalone trading tool for US stocks include The Matrix, should be used by investors looking to outperform the buy-and-hold investment strategy. The model produces the following observations: (1) bull and bear phases have produced average annualized returns of 26% and 61% and 32% and -7% since 1992 and 2017; these returns significantly outperform buy-and-hold (B&H) average annualized returns of 8% and 7% over the same periods, and (2) stock returns are clearly not random as taught by popular academic theories.
Sentiment Model Output 2015 and 2016
LTSO > 0 defines continuation of the bull phase and 10% annualized return since 6/8 (Sentiment Model). The average bull and bear annualized returns in 2017 are 30% and -10%, respectively. This dwarfs the buy and hold return of 7%.
Bull should have taken partial profits on 6/15 when BuS equaled 1 and was colored blue. Compression has given way to expansion within a bull phase (chart). Expansion represents peak energy release. Since the majority remains pessimistic (P), an upside breakout amid bearish headlines is still possible (see Sent Column).
Sentiment Model 2017-Present
Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.