Like cash balance, there is a good signal when investors feel panic near market bottoms. Below 10-15% equity weighting and I will be looking long. Even in early 2008, there was a sizable bounce before heading lower. There were other reasons to ignore this signal later that year.
The next chart looks at periods when total equity exposure exceeds 50%. For a sentiment indicator, I think this provides a decent warning signal. Not to short, but to tighten stops and start to reduce exposure.
