INVESTORS HAVEN’T BEEN THIS BULLISH SINCE 2007 MARKET PEAK
Being bearish is officially out of style. Sentiment readings have reached well beyond excessively bullish levels. The most recent Investor’s Intelligence survey showed another sharp increase in bullishness at 56.2%. This 7.6% surge in bullishness is the largest one week jump since April 2010. At 56.2% this is also the highest reading since December 2007. The last time bullishness was even near these levels was April 28th, 2010 just days before the flash crash.
Last week’s AAII survey also showed extraordinarily high levels of bullishness at 57.6%. This reading is literally off the charts and almost 10 points higher than bullish sentiment at the April highs.
Bespoke Investments highlighted how unusual it is to see both of these sentiment polls at such high levels:
“At a current level of 113.8%, the combined reading is the highest since mid-October 2007, which was shortly after the S&P 500 reached its all-time closing high of 1,565.15. More recently, the last time combined bullish sentiment was above 100% was in April 2010.”
“Buy the dip” and “don’t fight the Fed” have become universal rally cries in recent weeks. It now appears as though no one believes the market can sustain a decline. Unfortunately, the market generally frustrates the most people most of the time. If that saying rings true today the market is at a particularly risky juncture.
* AAII survey will be updated tomorrow after its latest release.
Update: AAII sentiment fell 17.6% this week to 40%. According to Charles Rotblut this is the largest decline since January 2009. Like the current reading, that decline followed a multi month high in sentiment. The market ultimately plunged until sentiment hit its low of 19% in March 2009.
Futures are on a tear overnight on no news. It looks to me like Obama and the gang want a big stock market rally tomorrow so they can go all over TV and tell everyone that they did such a great job with GM.
It’s a buy the dip world. We’ve seen II readings this high just 3 times in the last 3 years. Jan 08 preceded a 3 week 10.5% decline. Jan 10 preceded a 4 week 9% decline. And April 2010 preceded the flash crash.
Is it different this time?
http://www.tradersnarrative.com/ndr-crowd-sentiment-poll-at-april-2010-highs-5049.html
Today’s highs will be set on the open. Same for GM. Watch this overnight gap get filled today to the downside. We still have lower lows in this corrective pattern in my opinion.
I guess that if the S&P goes back to 1200, I will start a short position again.
Its Euro-scare versus kick ass earnings coming down the stretch.
I’m silly long. Not sure whose bullish – I sure as hell ain’t, but playing the upside anyhow. Admittedly very weak handed, but hey – so are the shorts.
Plenty ‘o fund managers out there chasin relative performance going into year end. Many went to cash around 1100. On the other hand there are the nervous longs ready to abandon ship at the slightest blip of pain.
So its a big game of chicken.
Lets see who flinches first.
Do you have this survey going back to the dot-com bubble days? I’m curious how it compares to 1999 or 1Q 2000.
I’ve followed Investors Int. since the late 70′s and have seen the bullish % as high as 60-62% so I would say there is really no magic number telling you when to get out. I’ve seen tops come from readings of about 54% on up. For me it was generally the most telling and useful when high readings were followed by technical divergences and warning signs like the advance decline line, highs vs lows, buying climaxes, etc. Having said this, 56% usually denotes very high risk and can be accompanied by vicious sell-offs seemingly coming out of nowhere (take a look at muni’s if you need an example). All these guys (and gals) looking for that strong year end/Santa Clause rally might just end up with a lump of coal and as for me, right or wrong, I’ll just let someone else have that last few percent of upside.
I can’t find anyone that is bearish…it is almost embarrassing
i raise my hand steadfastly
Actually AAII Bull as of 18/11/10 had a sharp reversal and it is now back at 40…. not bad since these are always backward looking indicators
AAII sentiment fell 17.6% this week to 40%. According to Charles Rotblut this is the largest decline since January 2009. Like the current reading, that decline followed a multi month high in sentiment. The market ultimately plunged until sentiment hit its low of 19% in March 2009. I am not sure how useful AAII is. The II survey has proven much more reliable and stable over the years.
will we live a boom just like the last moment of the internet bubble…dangerous times for bears…
Let me know when each poll hits 75-100%…the market may then put in a sustained decline…
It is just far too bullish still – one of the, probably the, strongest tape I have ever seen.
Euro contagion + china mini crash = 1.5% decline; no news = 1%+ ramps…hmmm
Is there a place on the web where we can get the historical numbers for these two polls (or the new numbers, as they come out)?
Would be great to overlay the SP500 on top of both of those charts, for perspective on on useful (or not) this study has been at calling mkt tops/bottoms.
JP on the coming dollar, weakest currency in world:
http://www.bi-me.com/main.php?id=49628&t=1&c=35&cg=4&mset=1011
When we get this bullish it’s either accelerate or die!
Bernake and crew must drink gallons of Powerthirst (http://www.youtube.com/watch?v=t-3qncy5Qfk) every day because they are ready to do some bear blasting! Short at your own risk.
You have to start looking at equities priced in gold. We may get a pullback in the s&p in terms of gold, but nominally this thing is not going down. We already have had moves similar to the great depression in the S&P when priced in gold.
I may be wrong, but I believe THIS weeks AAII survey showed a 17.6% decline to 40% in the % bullish number. This survey is awfully noisy with volatility and it does not help quoting a number taken 7 day ago that pre-dates two panic selling 90%+ down days!
A few sharp down days do wonders to clearing the slate for another run! Still want to be short?
In addition TPC, if you were to provide the charts going back to 2000, you will find this level of bullishness historically high, but nowhere near off the charts.
Thats not true. Readings near 60 in II sentiment are rare:
http://bespokeinvest.typepad.com/bespoke/images/2008/06/19/investors_intelligence_0618.png
TC you should update your chart as we have lower to 40 today from 55 last Thursday (11/11/10)… so back in line.. not that bullish after this week
was updated earlier as the original story said….
if you didnt think the government runs the stock market – now you know. it’s become a marketing tool for politicians.
so who was short going into the open?
How quickly things change….This market feels like it might not be allowed to decline before the year ends….
This market is a f’ing joke. We rallied 1% last night before any news even came out. Someone wanted this market higher today. There is absolutely no reason for a 2% rally. It’s absurd. You just have to go along with their games. The govt wants stocks higher so they’re higher. GM up, AIG up, everything up. Not even the Chinese prop up their markets like we do.
Then play along….
The deflationistas bought the OpEx shakeout hook, line, and sinker.
I took some oil at the close last night, dumped out soon after the open. That should pay for my gas bill on my Xterra this month.
reflexive rally.. casino dropped 4.5% in 5 days or so. oscillators were oversold. such is the asymptric way of a stock market
The most scary part is “no news”
AAII details what happens on a 4 and 8 week basis following a 17%+ decline in bullish sentiment. On average stocks trade lower by -0.5% and -1%.
http://chart.ly/s8u5vmu
Timing is always key…I get most excited when my view of the markets is significantly different then mainstream. I’m a bull as long as the FED keeps interest rates low…at 0% money is free right, so these sentiment indicators are not very interesting at this point. (other then today is a good day to sell positions you want to exit)
The FED needs to stop with this nonsense of zirp. You just start a shell corporation and buy all the crap from other entities you have an interest in at ridiculous prices with borrowed money at near 0%. The entity selling assets reaps the profits and now you have effectively collected bubble gains while shifting the risk to a single leveraged shell corporation. Repeat until the FED stops bailing out failed entities with QE/zirp. If you happen to have influence at a TBTF, congratulations…you can probably buy all the crap and then stick the tax payers with the loss after the crash so you won’t even lose the equity in the shell.
TPC — This is hysterical
http://www.youtube.com/watch?v=PTUY16CkS-k
More blowout earnings after the bell CRM, DELL starting to think we could see 1325 by year end.
its had to imagine now that sentiment was overly high in jan 2009.
Its the QE2 trip making everyone feel good. I can’t wait until they buy back my muni-bonds and bail out those losses. Did I hear anyone mention old student loan payoffs?
So does anyone have an opinion on whether or not not today was a deadcat bounce? I’m looking at the after-hours trading and it looks like people expect the market to climb big again tomorrow.
In my experience,using sentiment to trade the market isn’t all that great of a method. Anyway,
http://www.bespokeinvest.com/thinkbig/2010/11/18/bullish-sentiment-sees-largest-drop-in-nearly-two-years.html
I’m not a trader per se, but isn’t bullish sentiment a strong indicator for going short?
Hi, Anyone can tell me how was de II survey today?