Every investor knows that a general downslide in the overall market will eventually spread to all types of common stocks, thus it is essential to know the condition of the market sentiment, as it ranges from Greed to Fear. HRA has discovered a reliable measure of the Over or Under-Priced condition of the market we call the GOPF Index of Market Sentiment, standing for Greed, Optimism, Pessimism, and Fear. This chart plots current actual pricing of our database of stocks against their theoretical pricing in order to determine where the market stands as measured using standard deviations from the norm . If actual pricing is higher than theoretical, than we are either in the optimistic range (between 0 and 1) or the greed range (between 1 and 2). If actual pricing is lower than theoretical, we are in either the pessimistic range (between 0 and -1) or fear range (between -1 and -2).

The chart above starts in early 1989 when the stock market was two standard deviations below normal (Fear range). A new Bull market began in October 1990, lasting until early 1992, when the market was 1.4 standard deviations above normal (greed range). This reversal lasted until early 1996 when the market sank to 1.5 standard deviations below normal. The drop off began again in late 1999 and early 2000 as the technology bubble burst. The market held it’s bottom to less than one standard deviation below normal in early 2001, but blew off at the top a full 2 standard deviations above normal in May of 2002. Our U.S. stock market has been underpriced since 2004, based on our calculations.

This index can help you determine the probable longer term direction of the current stock market.