How confident a person are you? There are numerous experiments that you can carry out to ascertain this, according to amateur psychology advocates. Drink half of your last pint of beer, and ask yourself how you feel; look into the mirror closely, and describe what you see; enter a room full of strangers, and try to engage someone in conversation (warning – I wouldn’t try all three in quick succession in your local pub/nightclub, if I were you). But how confident should you be? This is an altogether more finely-balanced question, at least in British society. Be under-confident, and competitors will deem you a loser; be over-confident, and colleagues will think you an arrogant loser; be naively confident, and con-artists will ensure you shortly become a loser.

How confident an investor are you? There are now numerous extrapolations that can ascertain this, too, according to investor sentiment analysts. Ask fund investors how they feel, look into market activity closely, or engage a room full of independent financial advisers in conversation (warning – I wouldn’t try this last one, if you were me). But how confident should you be in the findings? This question is still in the balance, at least in the UK. Be too naively confident in the views of others, and you could shortly be incurring investment losses.

You wouldn’t think it, though, if you paid attention to the latest sentiment indicators.

Last week, the Investment Management Association’s GB Investor Confidence index turned positive – registering 106 on a scale of 0-200, with 100 being neutral. Compared with six months ago, overall confidence was up 35 points. More than half of the 4,396 private investors polled thought it a good time to put money into funds, and equities were the most popular option.

On the same day, the Fidelity FundsNetwork Adviser Sentiment Index recorded a similar improvement, with forecast business levels in the next 12 months rising to 0.48, on a scale where 0 represents “normal”. Of the 200 advisers asked, most said investment business had been picking up since December.

Just two days later, the Virgin Money Investor Intentions Index showed a “surge in optimism”. More than three quarters of the intermediaries surveyed said they were advising their clients to invest in UK shares over the next three months, compared with just 57 per cent in February. As a result, UK shares topped Virgin’s Investor Intentions Optimism League, ahead of emerging markets and bonds.

Then, this week, Fidelity International’s Investment Clock ticked around “from Reflation into equity- friendly Recovery” for the first time since early 2007.

Now, far be it from me to dent your confidence, but there are just two small problems with all these ebullient indicators. They are all relative, rather than absolute. And they are all reflective, rather than predictive.

You would do better to pay attention to a couple of indicators with rather longer track records.

Two weeks ago, the latest monthly Coppock Indicators were calculated. Devised in 1962 by Edwin Coppock, the US economist, they measure the strength of market movements as a positive or negative number (for the mathematically-minded, they are the 10-month weighted moving average of the sum of the 14-month rate of change and the 11-month rate of change in the relevant index). A buy signal is generated when a market indicator is in its negative phase, and then begins to rise after a falling trend. But while the Coppock indicators gave buy signals for nine major market indices at the end of May, the FTSE 100 was not one of them. That was telling, as the indicators have predicted the start of 16 of the last 17 US bull markets – although they cannot identify downturns.

So, I asked the Investors Chronicle’s statistics editor, Robert Ansted, to look at the magazine’s own variant of the Coppock Indicators which, since 1963, have been generating both buy and sell signals. He confirmed that, on these measures, the FTSE 100, FTSE All-Share and Dow Jones indicators still haven’t turned positive. That is arguably more telling, as trading the buy and sell signals on the FTSE 100 since 1982 has delivered a return of 1,224 per cent, against the market’s 908 per cent rise.

Reading between the lines, even some of the sentiment soothsayers are aware of this. Fidelity’s Inside Track report cited Coppock this week and concluded: “It would be foolish to assume markets will rise in an uninterrupted trend from here.” More fool those
who invest on this assumption. Or as another American commentator, Edgar Allen Poe, put it: “I have great faith in fools; ‘self-confidence’ my friends call it.”

matthew.vincent@ft.com