Getting Started with sentimenTrader

I hope and trust that you will find your time and money well spent with us. If not, I want to hear from you. If you are not satisfied with our service for any reason, please email me directly, and I will make every effort to get back to you promptly.

Our Goal

We want you to improve your trading and investment returns by increasing your knowledge of, and access to, one of the more important and effective keys to stock price movement - investor sentiment.

Please note that I did not say the "only" key - sentiment analysis is only one part of a complete trading or investing strategy. We feel our analysis should be incorporated into other thoughtful technical and fundamental work, and not be used in isolation.

Why don't we try to present everything? Because we have one unique niche - market sentiment - and feel that you can get more complete technical and fundamental analysis elsewhere.

For the sentiment analysis part of your work, we strive to be the go-to service that you turn to for help. In addition, academic studies have shown that up to 50% of an individual stock's movement is caused by general market forces, an additional 30% is influenced by the sector the stock is in, and only 20% is specific to that stock. We concentrate on the 80% (market and sector).

Our focus is not "market timing" per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence.

A note about sentiment in general: it works best when going with the major trend but against the immediate trend. For example, "excessive pessimism" readings will have a very high rate of success at preceding rallies during long-term bull markets, but will be less accurate during bear markets.

sentimenTrader Website Overview

"Excessive optimism" readings will precede corrections with consistency during bear markets, but will be less accurate at pinpointing tops in bull markets. We try to wrap our analysis and studies in that context...but even if we fail to do that, please remember the above.

Our Approach to the Markets

  • The goal isn’t to “beat the market”, it’s to find low-risk, high potential reward opportunities for those looking for entry and exit points for long and short positions.
  • The ultimate setup (stress on “setup”) for an opportunity to buy is one where insiders are buying heavily, while the public is selling heavily. A great preference is placed on instruments that are in long-term uptrends or sideways ranges. Such setups in consistently downtrending markets are less consistent and more likely to hit stop losses.
  • Defining “uptrend”, “downtrend” and “rangebound” is all subjective. We have found the slope of the 200-day (or 40-week) average of an instrument has tested as well as just about anything else. Just use an eye test – over a three-year period, if the instrument is carving out higher highs and higher lows, then it’s in an uptrend (focus on buying opportunities). If lower highs and lower lows, a downtrend (focus on selling opportunities). If you can’t really tell, then it’s range-bound (both buying and selling opportunities can work well).
  • Sometimes we get caught in large-frame trend reversals when an instrument is transitioning from uptrend to rangebound to downtrend, and vice-versa. Failures and losses happen. Risk control is paramount, no matter how good the opportunity seems.
  • Once a setup is identified, use the simplest of methods to determine an entry/exit. Our preference is using trendlines going out no more than 1-3 years at most that are obvious and have a tendency to trigger a reverse in sentiment by the public. We place little to no weight on common (or obscure) technical patterns. We will rarely if ever discuss triangles, head and shoulders, Fibonacci or other commonly referenced techniques and patterns.
  • The most typical time frame for the best risk vs reward outlook is 1-3 months, but that can vary quite widely - some are viewed in days, others in years.
  • We have tested thousands of technical indicators across years, decades and in some case centuries of data. None work consistently across time frames and instruments.
  • There are ways to optimize trades, depending on whether one prefers to trade options, futures, ETFs, stocks, etc. We focus on the opportunity, not the trade itself due to the wide risk tolerances, time frames, skill levels and other factors among readers.
  • We are not proponents of averaging a losing position. A trade that moves against us tells us that we are wrong, and we don’t want to compound errors. Adding to a winning position is mentally difficult, but we generally want to stick to positions where the market is telling us our thesis is correct.

Email

A post-close Sentiment Report is emailed to all subscribers, typically by 6:30pm EST (almost) every day that U.S. markets are open for trading. Bulletins are sent on an ad hoc basis when warranted. All reports are posted to the website and archived before being sent.

Please note that sentimenTrader is NOT an email-based service. We send emails strictly as a courtesy.

If you don't see emails from us within 48 hours of subscribing, then be sure to check any spam folders in case they gets routed there. This is especially true of those using Gmail, Comcast, Yahoo and AOL email services.

Please understand that forwarding or other distribution of any email or other content on sentimenTrader without prior permission is a violation of your subscriber agreement and copyright laws.

A Note About Studies

We post a lot of studies in the Reports. Sometimes, the conclusions from the studies will conflict with one another on a day-to-day basis, or even on the same day. And sometimes if the market moves in the direction a study suggests, it will satisfy the conclusion faster than expected.

This is when the "art" of trading and investing comes to the fore. We don't trade any studies on a mechanical basis, but rather use them in a weight-of-the-evidence approach. A study that gives a solid edge with a large sample size will definitely influence our outlook, but no study is an end-all, be-all. We wrap it into a more comprehensive view of how markets are acting.

Navigating The Site

It would be easy to get lost in this site, as it can be a bit like trying to take a drink from a fire hose, so the most important step you can take initially is to be sure of the time frame in which you are trading.

For longer-term investors, who have a time frame of months and more, it usually does not pay to take the shorter-term models and indicators into account right away. For shorter-term traders, it is best to begin with a few of the longer-term indicators and models and work your way down to your time frame.

My best advice is to take some downtime to find a handful of measures that you find worthwhile - do not get caught in information overload by feeling you need to keep tabs on everything! If something that you don't normally follow gives an extraordinary reading, then I will almost always touch on it in one of the comments.

Here is a quick overview of the navigation:

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DESCRIPTION

Dashboard This is the "home page" for subscribers.  Any important announcements will be listed at the top of this page.  It contains a brief short- and intermediate-term summary of our current thoughts, as well as a quick guide to any extremes in our models, indicators and seasonality
Reports

We use several ways to communicate:

  • Sentiment Report - This summary report is posted to the site each evening after the markets close and emailed to subscribers.
  • Premium Notes - These can cover any topic, usually related to sentiment. There is no regular schedule for these.

  • Twitter - I'll post quick stats, links or other items that may be of sentiment-related interest with no set publishing schedule, but again it is not "must read" and if you choose to ignore it, no big deal. You can find the Twitter posts here.
Indicators

This is the main point of access to reach each of the indicators currently posted to sentimenTrader.  A summary page is presented, as well as links to the interactive chart and a detailed discussion of each one, with important levels to watch.  Once you know which ones you'd like to follow, you can use the Favorites page to save them.

There are summary pages for:

Seasonality Like moon phases on tidal activity, there are forces at work in the equities markets that are not fully understood.  We do not place much emphasis on seasonality.  This page will give you a glimpse at some of the most consistent biases.

Once you're familiar with the site and know what you'd like to see, be sure to check out the time-saving links at the top of most pages, which drop down as you put your cursor over them, saving you many steps to get to the charts you want.

About Our Charts

Almost all of the indicators and models on our site are bounded by green and red bands.

If an indicator travels outside of its green band, then that equates with "oversold" conditions, for lack of a better word. When this happens, we typically see prices rise going forward.

When an indicator goes outside of its red band, then that means the indicator is "overbought", which most often leads to a market decline or consolidation.

We have inverted the scales on some indicators (i.e. flipped them upside down) so that an indicator that is overbought is peaking towards the top of the chart, while one that is oversold is scraping along near the bottom of the chart. While it is counter-intuitive for certain indicators, presenting them this way allows us to more easily see how peaks and troughs in the indicators coincide with tops and bottoms in the market.

Update Times

The models and indicators that are updated daily are usually updated by 5:30 PM CSAT each evening unless there is some extenuating circumstance. An exception is the Rydex asset flow data, which is not released until late each evening or early the next morning.

Important Notice!

We do not intend our models or portfolio changes to be trading signals for any subscriber.

The models are meant as secondary indicators, not as a trading system unto themselves. Please follow your own methodology and use the models and indicators as additional confirmation. We do not, in any sense, recommend that subscribers place a trade simply based on a model or portfolio change.

If you need to update any of your account details, such as email address or credit card information, you may do so in the "My Account" section of the menu.

We take feedback very seriously, so if you have any suggestions for how we could better meet your needs, please feel free to contact me directly.

I wish you profitable trading!

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Jason Goepfert
President and CEO
Sundial Capital Research
jason@sentimentrader.com