The high in US stock market bullish sentiment, with the low in 2CS at 57, was on March 20, about two weeks before the last new high of the year for SPX. It is fairly typical to see that type of "sentiment divergence" into the last price high. As of this past week 2CS is back up to 93 which is neither high nor low and therefore not helpful. In late 2006 and 2007 there were multiple rallies which took 2CS into the low 50's and even once into the 40's, so I cannot rule that out for 2012.
Then too, volume studies are suggesting we are into the range for at least a temporary stock market low. We are, of course, all aware of the sell in May and go away story based upon the historical record for minimal total returns from May to September or October. Jitters due to the US and other elections and worldwide central bank interventions are unlikely to improve that typical outcome. However, we can only rely upon technical analysis as we go along. Opinions vary and aren't terribly useful.
I lightened up in most assets since January, but lately have added some beaten up gold stocks and energy stocks on a relative value basis. Gold stocks compared to gold are as cheap as they have been since 2004. But I'm holding a lot more cash than at any time since mid 2007. There's an old saying that no one ever went broke holding cash, and it's a good saying for retired investors like myself.
Including cash and gold and investment accounts I'm up only 2% on the year after having been up 6.5%. For me that's a pretty big drawdown, so I am going to be very careful not to let it get away from me. I've been interviewing some personal money managers, and the first question I ask is how much did you lose in 2008, and how are you doing this year? Often I don't even get a straight answer. So far I go home and reluctantly decide to keep managing my own funds. I am holding more of a constant core than I ever have and I am just trading around it modestly on a value and sentiment basis. It's more a set and watch closely than a set and forget approach.
The average total return of six favorite funds for the past five years (since 4/12/2007) is 6.91% per year. The funds: VWINX, FPACX, LSBDX, PRPFX, and PTTRX. VFINX, the Vanguard S&P 500 index fund, is up 1.24% over the same period.