How to trade this market? Get the pulse of the investor sentiment correctly

After breaking the 50-day moving average, stock market around the world failed to make a new high in early January, subsequently stocks just cratered, due to continuous bad news from the US. Sentiment has turned from optimistic to downright depressing. Another worrying sign is the weakening performance of bank stocks

To get the market direction correct and assist stock picking, I develop a quantitative model to track investor sentiment and capture the market anomalies in stock market. In a nutshell, on one hand, investment sentiment measures the extent to which market is pricing for the future. On the other hand, factor returns are greatly affected by such sentiment. The former drives the asset allocation decision while the latter determines the stock selection process. Back-testing shows the past 20-year annual return of my top 10 holdings (ex transaction fee on monthly turnover) is 18.3%.

The rightmost table is my top 10 HK-listed stocks as of Dec 2008. I also have one for US-listed stocks (not shown here)

HK1169 HAIER ELECTRONICS GP.
HK1168 SINOLINK WORLDWIDE HDG.
HK18 ORIENTAL PRESS GROUP
HK171 SILVER GRANT INTL.INDS.
HK685 MEDIA CHINESE INTL.
HK2866 CHINA SHIP.CTNR.LIN.'H'
HK1033 SINOPEC YIZHENG CHM.FRE. 'H'
HK981 SEMICONDUCTOR MNFG.INTL.
HK1208 MINMETALS RESOURCES
HK338 SINOPEC SHAI.PETROCHEM. 'H'