Insider Monkey, your source for free insider trading data, has shown that Nouriel Roubini’s popularity has been a reliable sentiment indicator for the most part of the past 4 years. The increases in Roubini’s popularity are followed by declines in the stock market and the declines in Roubini’s popularity have been a bullish indicator for the stock market.
The reason is simple. Whenever investors are turning bearish about the market, they search for Roubini’s latest opinions on the internet. Jumps in Roubini’s popularity in Google searches lead the declines in the stock market by up to 2 weeks. Conversely, declines in Roubini’s popularity shown in Google searches are an indicator for bullish sentiment.
In February, Roubini’s popularity hit its post-Lehman low. Compared to early September, Roubini’s popularity declined by 50%. Compared to May 2010, it’s down 75%. Actually, Roubini was 10 times more popular during the Fall of 2008 than he is now. His popularity is more than 20% below its 8-week moving average and this is extremely bullish for the stock market. Here is the latest graph:
Whenever Roubini’s popularity falls below 80% of its 8-week moving average, the S&P 500 index increases by an average 1.5% during the following three weeks. This held true in the 2007-2010 period, when the stock market declined by an average of 0.12% during a random 3-week period. This indicator was also reliable 62% of the time.
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