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Key Sentiment Report Grows More Bearish Despite Rally

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Taking a closer look at market sentiment versus the SPX.

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Rocky White recently discussed the latest Investor's Intelligence poll and how the bulls-minus-bears line isn't quite showing extreme optimism just yet. In this report, over 100 independent market newsletters are studied, and each author's current stance on the market is assessed: Bullish, bearish, or correction. With the S&P 500 Index (SPX) back near its 2012 peak, I thought it might be a good idea to see how bullish this group was during that time. Looking at the chart below, you can easily see how there are actually less bulls than there were during the previous March high.



Remember, though, the newsletters can also be "neutral" or "bearish." So, let's take a look and see where those bulls have gone since last March. It's clear from the chart below that there are more bearish market newsletters than there were in March. To sum it up, with the market trading back near its highs, we've seen a decrease in bullish newsletters and an increase in bearish newsletters.



Generally, market tops form when euphoria overwhelms the market, and less and less buying power is available to sustain the price action. With respect to this sentiment report, I think it's safe to say investors aren't quite as optimistic now as they were during the previous peak. While we are starting to see some optimism creep into this market, I would strongly hesitate to state that this sentiment is anywhere near euphoric.

This article by Joe Bell was originally published on Schaeffer's Investment Research.

Below, find some more great content from Schaeffer's Investment Research:


The Gap Tags a New Multi-Year High Amid Bearish Speculation

Did These Magazine Covers Work as Sentiment Indicators?

Bulls Jump on EMC for the Long Haul

Twitter: @schaeffers
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No positions in stocks mentioned.
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