This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Kass: The Bob Farrell Sentiment Indicator

This column originally appeared on Real Money Pro at 7:36 a.m. EDT on Aug 8.

NEW YORK ( Real Money) -- Among technical analysts over the last five decades, Bob Farrell stood tall.

"Uncle" Bob was the legendary head of technical analysis at Merrill Lynch until late 1992. Among his numerous contributions to the investment business, my favorite was his " 10 Market Rules to Remember."

Bob created a market indicator that was simple in its approach but relatively precise in its predictive ability.

The Farrell sentiment study and market indicator takes the bullish percentage in the AAII survey and divides the figure by the bearish percentage plus half the neutrals. He then takes a 10-week moving average.

A bullish (and oversold) buy signal occurs when the 10-week average falls under 0.50 and rises from there. (There is often a two- to three-week lag before the market turns up.)

A bearish (and overbought) sell signal occurs when the 10-week average moves above 1.50 and then begins to fall. (Here, too, there is often a two- to three-week lag before the market turns down.)

Here is a download to the data since late 2002, compiled by a pal/buddy/friend of mine, former (and also legendary) specialist Bill Silver.

As you can see from the recent data, the Farrell sentiment indicator is close to (but not yet at) a buy signal.

I plan to update Bob's indicator on a weekly basis. (The weekly data is available on Thursday afternoons on Bloomberg.)
Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs