The Sentiment Cycle Revisited


Checking back on the sentiment cycle from January. Seriously, take a look at this. It's pretty cool

Back in January, I wrote this post The Sentiment Cycle applied to the SPX chart . I compared the "Sentiment Loop" from Justin Mamis book 'The Nature of Risk' to the SPX 6 month chart. The similarities were uncanny. Here is the sentiment loop from the book:

And here is the chart I posted from January:


Now here is where it gets interesting. Here is the same chart as of today, June 12th. Unfortunately it doesn't look as pretty because it's so stretched out, but the point is the 'Returning confidence' at the end of the cycle played out exactly as predicted. Now that we've passed that phase, we should be right at 'Buy the dip', followed buy 'Enthusiasim', before the market falls off a cliff again.