Skewed sentiment is an important coincident indicator at market turns. By definition, financial markets are most bullishly optimistic at major tops and most bearishly pessimistic at major bottoms. Magazine covers can act as a sentiment thermometer at market turns of different time constants. Covers are one tool hanging in the trader’s workshop that can help spot a heavily bunched herd. With this white paper, I intend to place a general, stylized framework around the use of magazine covers as contrarian market indicators to better define their usefulness. Topics include: magazine types, magazine cover content, and the noise problem.

Magazine Types

The most coincident covers tend to come from broad, national news/commentary magazines because they rarely touch upon economics and mirror hot trending topics to draw the widest viewership. Time and Newsweek fit this category. Both appeal to a vast common audience and channel the current public zeitgeist in their cover

Editor’s note: This was originally published at Mark Minervini’s Official Blog and is republished here with permission.

“What’s making the market go up?” “Why is my stock going down when the company has a great product and they just reported good earnings?” I’m asked questions like these all the time. Making money and controlling risk depends far more on discerning a stock’s probable price direction than knowing the “why” behind that movement. Indeed, often you will learn the “why” well after the opportunity to avoid loss or reap gain has passed. The only true answer for why your stock is moving up or down is that more dollars are bidding than offering and vice versa.

Armed with an appreciation of the law of supply/demand, you can learn how to position your portfolio in stocks that have a good chance of attracting willing buyers who will bid your shares up—even though you may

Editor’s note: This report was prepared by Archaea Capital Research for release in October 2013 and is reprinted here with permission. It begins with comments made by leading figures in investment analysis and builds on those ideas to develop unique insights into the economy and the markets. It is reprinted here as an example of how charts and intermarket analysis can be applied to economic analysis.

Reflecting on Bill Gross’ recent investor letter re: Ray Dalio’s “Beautiful Deleveraging”

“The last time the U.S. economy was this highly levered (early 1940s) it took over 25 years of 10-year Treasury rates averaging 3% less than nominal GDP to accomplish a ‘beautiful deleveraging.’” – Bill Gross

Starting with the big picture.

We constructed this chart of the S&P, U.S. Nominal GDP Growth, and U.S. 10-Year Treasury Yields:

1. Since the 2000 peak in Stocks, the U.S. has experienced two major deleveraging / deflationary