We actively monitor several investor sentiment gauges that indicate how optimistic or pessimistic investors are about the stock market. One of the sentiment indicators we monitor is the Citigroup Panic/Euphoria Model. When it reaches an extreme, I comment on it here.

The Cboe Implied VIX Index is a measure of expected future "implied" volatility. The Cboe® Realized Volatility Index is designed to indicate the magnitude of actual realized daily price movements by measuring the annualized standard deviation in the daily price return of an underlying over a specific period.

A position with asymmetric risk/reward is one in which the possible profit is larger than the potential loss, or the size of the expected gain is greater than the magnitude of the loss.

I pointed out in Downtrend but Statistically Oversold Short-Term as Gold Turns Up the US Dollar had reached a statistically oversold level, setting up a high probability for a countrend.

According to Citi, the panic/euphoria model is a gauge of investor sentiment. It identifies "Panic" and "Euphoria" levels which are statistically driven buy and sell signals for the broader market.

Sector trends offer dispersion: over the last 10 years, the average difference between the best-performing and worst-performing sectors has been 45% per year.