Mark Hulbert publishes a newsletter, the Hulbert Financial Digest, a subsidiary of MarketWatch, that follows the performance of other investment newsletters. He has been doing this since 1980. His methods are similar to those of Investors Intelligence. A number of these newsletters discuss the price of gold. Using this information, Hulbert calculates an index of gold market sentiment. As with other measures of investment- advisory newsletters, the performance results prove to be an excellent contrary indicator of the market’s future direction (see Figure 7.35). Ned Davis Research, Inc., looked at this data and calculated the standard deviation about a moving mean of the Hulbert Gold Sentiment Index. They found the classic inverse relationship between sentiment and future price behavior. When the index declined below -0.6 standard deviations, the gold futures advance at an annual rate of 26.3%, and when the index advanced 0.6 standard deviations above the moving mean, the gold market declined at an annual rate of 14.2%.
Source: Kirkpatrick II Charles D., Dahlquist Julie R. (2015), Technical Analysis: The Complete Resource for Financial Market Technicians, FT Press; 3rd edition.
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