Chart of the Week: U Michigan Sentiment Index Gives Market Warning

"Such steep and widespread declines in confidence have
typically triggered recessions," though a recession is not
said Richard Curtin, the director of U Mich consumer
surveys. The drop paralleled the decline following Iraq’s invasion of Kuwait in

U Michigan Sentiment Index Gives Market Warning
click for larger chart
Source: Robert McHugh

Some Traders find a correlation between consumer sentiment
and Dow Industrials’ price movements. Robert McHugh states that “often, the sentiment index and equity prices move
contemporaneously, so we do not benefit from foresight. On occasion, we do get
an early warning as the sentiment index leads prices.” We will see if this
recent drop presages another.

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Quote of the Day:

"Any activity becomes creative when
the doer cares about doing it right, or better."    
~John Updike

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What's been said:

Discussions found on the web:
  1. Tonythetiger commented on Sep 21

    “We will see if this recent drop presages another”

    Well, that’s exactly what is happening as of now. However, the VIX is in extreme mode with a gap beneath , and the market is oversold.

  2. Moussa Hawas commented on Feb 8

    Dear Sir/Madam,

    Hope all is well.

    Let me introduce myself, I am Moussa Hawas, Equity Research Analyst dealing with the Egyptian Market.

    I am looking forward to constructing stocks sentiment index for the Egyptian Equity Market.

    As a matter of fact, I am interested in your sentiment index that has been established by your skilled team as I believe it is more reliable than any other indexes published as far as I know.

    I will be more grateful if you kindly send me the methodology used in such purpose to be helpful in my task. Further, I will appreciate if you kindly send me any indicators tabulations regarding those terms.

    Best regards,

    Moussa Hawas

    Equity Research Analyst

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