How To Turn Investor Fear Into Opportunity

Andrew’s Note: Master trader Jeff Clark is predicting an opportunity decades in the making, just weeks away…

During similar events in the past, his subscribers booked gains like 1,391% in 78 days… 1,263% in 68 days… even 1,285% in just 48 hours.

To help prepare you this time around, he’s hosting a free presentation on April 5 at 8 p.m. ET. There, he’ll share a free recommendation you can start trading immediately. Simply click right here to sign up now.

And below, continue reading for Clint Brewer’s latest market analysis…

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If you turn on the business news, you’ll be bombarded with predictions of economic disaster…

Dire headlines of bank failures, more interest rate hikes, and stubborn inflation have soured investor attitudes toward the stock market.

But this is when traders need to be the most alert for profitable opportunities.

Investor sentiment works as a contrarian indicator at the extremes. So, it pays to bet against the crowd when the mood quickly becomes lopsided in one direction.

And right now, the bearish sentiment is giving traders a good signal despite all the doom and gloom.

Based on one key measure of sentiment, we’re approaching an extreme that has marked stock market turning points in the past…

Gauging the Mood of the Crowd

When investors are collectively too bullish, there’s little additional purchasing power to push stocks higher.

But when everyone is bearish, sentiment can act as dry powder for boosting stocks.

Now there are many ways you can measure investor sentiment… You can track things like investor portfolio cash, where a high level indicates widespread fear.

Or you can monitor how many put options investors are purchasing relative to call options. A spike in puts means investors are rushing into downside protection, indicating more fear entering the stock market.

No matter the measure, the goal remains the same: look for extreme levels of fear or greed which could indicate the potential for trend reversals.

And one of the simplest indicators to measure sentiment is currently flashing a buy signal…

Are You Feeling Bullish?

If you want to reveal the mood of investors, you can also just ask them.

Every week, the American Association of Individual Investors surveys retail investors and divides them into bullish versus bearish camps.

You can evaluate sentiment by tracking the ratio of bulls relative to bears.

Check out the indicator in the chart below over the past year, with the S&P 500 in the top panel and the bull ratio in the bottom panel…

Each time the portion of bullish investors has dropped to an extremely low level (green circles), the S&P 500 started to rally. Those three rallies went on to gain 12% on average in less than two months.

And now, we’re once again hitting territory marked by fear (green arrow).

Since peaking in early February, the S&P 500 has dropped 5%. And that’s driving a surge in bearish sentiment, with few bulls remaining.

You shouldn’t interpret this reading as a signal that the bear market is over.

However, the current mood shows we could see a short-term rally. And the last few times a similar bullish sentiment was cleared out, traders had big opportunities to profit.

Best regards,

Clint Brewer
Analyst, Market Minute

In today’s mailbag, a Jeff Clark Alliance member thanks Jeff for his measured approach to trading…

I just want to tell Jeff how much I appreciate his measured approach to trading, i.e., not feeling compelled to publish a trade, if it’s being posted on a wing and a prayer. I’m happy to read his thoughtful summaries of why there are days it’s fine to sit on the sidelines.

– Laura H.

Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].