Now that QE2 has started, corporate earnings have for the most part been better than expected, and the market has rallied - everything seems to be fine, at least according to the latest Investor Intelligence sentiment figures.
Each week the service Investors Intelligence surveys some 140 financial newsletter writers to determine whether they are bullish or bearish in their opinions to subscribers. The resulting Investors Intelligence Survey compiles the data to arrive at a weekly percentage of bulls vs. bears. The Survey is considered a contrarian indicator, since extremes in either direction have historically signaled a reversal of the market’s current trend.
Currently, the readings are just as bullish as they were back at the end of April 2010, right before the flash crash in May and the subsequent drop into July. While there is no guarantee the markets will decline, given the history of the sentiment readings as a contrarian indicator, it makes sense to be more cautious at this juncture and patiently wait for sentiment to turn more bearish and less bullish.
Below are the most recent charts for bullish sentiment and bearish sentiment along with recent commentary from Investors Intelligence.
Overview
The election is over and the latest quantitative easing has commenced, with indexes showing remarkable gains since the end of August. That was when the Fed action was first announced and polls forecast the change in Washington, which occurred. Despite the already solid gains near 20% in about 2½ months the latest readings show a lot of advisors apparently “buying the news” as the percentage of bulls soared over 8% the last week. The jump came within a hair of the levels shown in December 2007, which were just below their high of 62% from October 2007. That was the all-time stock market high.
