Each week, WhisperNumber.com conducts a markets confidence survey. In our recent investor survey, The Wisdom Tree Middle East Dividend (NASDAQ:GULF) continued to have an "extreme" confidence reading. An under-confident or low percentage result indicates an oversold market where strength can be expected. An over-confident or high percentage result indicates an overbought market where weakness can be expected. (In other words, data requires contrarian interpretation.)
The Wisdom Tree Middle East Dividend fund falls under the Diversified Emerging Markets category. Financials (39%), communication (35%), and industrials (16%) comprise the bulk of the assets in GULF.
In 2012, we had two extreme readings (indicating strength) for the Middle East region. The first reading was gained in our January 6, 2012 survey. At that time, GULF traded near the 14.45 mark. The oversold trend lasted until January 23, 2012, when GULF was trading at 14.41. This resulted in a loss of 0.2%.
The second reading was gained in our February 3, 2012 survey. At that time, GULF traded near the 14.90 mark. The oversold trend lasted until April 30, 2012, when GULF was trading at 15.25. This resulted in a gain of 2.3%.
Our most recent extreme market confidence reading was gained in our October 12, 2012 survey. At that time, confidence dropped to a low of 0.0% (indicating no investor confidence in the market). This matched the 52-week low (with the 52-week high at 4.0%). At that time, GULF traded near the 14.57 mark. The oversold trend continues through today, with GULF trading near 16.20. So far, this a gain of 11.2%.
A number of our regional confidence readings tend to fall out favor (or out of sight) with the investors and traders that participate in our surveys. The Middle East region is often seen as too volatile to gain attention from an investing standpoint.
Although the first two readings yielded a minimal net return, the continuation of a 0% confidence rating for the Middle East regional markets continues to indicate the potential for additional market strength.
WhisperNumber.com conducts weekly surveys to its registered userbase of individual investors. We've been conducting these surveys since 2002. Each survey, on average, receives over 1,100 responses from our participants.
The premise of each question is: How confident are you about the future of the market? This question is asked of the general market (Dow, S&P), 11 market sectors, 12 Exchange Traded Funds, 10 Global Regions, and three Bonds markets.
We look to see where the "herd" is headed, and take the opposite route. The "herd" (in this case, actual investors) is usually chasing a market higher or lower. In some cases, chasing the market does yield positive results, but in most cases, chasing a market ends up in losses. Analysis of our data concluded we were taking a snapshot of sentiment that indicated the opposite of actual market moves. Thus, it required contrarian interpretation in order to be accurate.
The responses collected from these surveys are presented in the Market Whispers Market Confidence Report. The responses are percentage-based, but also include a simple overbought, oversold, or neutral tag, along with basic commentary. An over-confident or high percentage result indicates an overbought market where weakness can be expected. An under-confident or low percentage result indicates an oversold market where strength can be expected.
To determine the oversold, overbought, and neutral ranges, we've analyzed the past 52 weeks' high and low confidence readings for a given market, with an analysis of historical price movement to determine cut-off points.
All trading involves risk and the information presented is not intended to be a recommendation of any kind.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.