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The Short-Term Extreme Model (STEM) is a
model consisting of several real-time sentiment measures including:
We use 30-minute data to calculate the
index, which allows us to capture intraday extremes which so often occur
while for the most part avoiding early-morning inaccuracies.
The model (blue line) will range between
0% (most bearish) and 100% (most bullish), although extremes below 20% or
above 70% are very rarely reached.
The green and red bands are 1.5
standard deviations from the one-year mean, so 80% of all readings should
be contained within these bands.
When we observe a reading
approaching or exceeding one of the bands, it's time to pay attention -
sentiment may be getting stretched a bit too far and about to snap in the
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