Odd Lot Oscillator

There are hundreds of technical indicators and each one has certain strengths and weaknesses. That being said, the odd lot oscillator is of some particular interest at the moment. The odd lot oscillator is a sentiment indicator that shows the ratio of odd lot sales to purchases - an "odd lot" is a stock transaction of less than 100 shares usually made by small retail investors, otherwise known as dumb money.

In essence, when the odd lot oscillator is high, odd lotters are selling more than they are buying and are therefore bearish on the market. Likewise, when the odd lot oscillator is low (as it is right now) it shows that odd lotters are buying more than they are selling and are bullish on the market. In order too trade contrarily to the odd lotters, you should buy when they are selling (when the index is high) and sell when the odd lotters are buying and bullish (when the index is low). Unlike other sentiment indicators like polls, the odd lot oscillator actually provides an indication what the average investor is doing with their portfolio. Below you will find a four-week moving average of odd-lot activity plotted against the S&P 500 - the odd lotters are in red.