Back in the days of no money and no responsibilities, my Arlington, Virginia housemates and I would sit around on Sundays playing backgammon while watching the NFL games on TV. During these competitive backgammon games,my housemate, Ted Cover, would often have the luck of rolling double sixes to clear the board. These double sixes seemed to happen more frequently than the odds would suggest which lead to his nickname of “BOXCAR Teddy”.

Similar to Ted Cover rolling those late in the game BOXCARS, I ran my sentiment model last Friday and what came up……..-6,-6….which means both professional and individual investors are extremely optimistic on the market. Unfortunately, extreme optimism is often a short term negative for forward looking market performance. In over 1,587 weeks of my data, the -6,-6 reading has only happened 56 times or 3.5% of the time. Coinciding with my sentiment data, the Ned Davis Crowd Sentiment report hit its highest level in history last week at 78.9. (See Below)

As you can see from the above S&P 500 performance data from Ned Davis, any reading above 66 (currently 78.9) results in an average -2.89% return on the S&P 500 over the next year. At American Capital Advisory, we use sentiment data to shape our investment mindset on how conservatively or aggressively to manage portfolios. At this point we are conservatively managing portfolios with 10%-20% in cash while allocating a good portion of equity assets towards international stocks which are trading at lower valuations and are just approaching their 2007 highs.
As always, American Capital Advisory is still accepting investors into our investment strategies and I would welcome any referrals.