Growing Bullish Sentiment is Indicating Stock Market is Getting Very Dangerous

ByBrad Lamensdorf

Growing Bullish Sentiment is Indicating Stock Market is Getting Very Dangerous.  We use investor sentiment as historically accurate contrarian indicators of the direction of the stock market. So we’re not surprised the ongoing record-breaking rallies are making investors absolutely giddy.  As a result, blinding them to the evidence that the market is increasingly overbought. In other words, all that illogical optimism is pushing bullish sentiment to danger levels, from a contrarian viewpoint. For instance, The Investor Intelligence poll of more than 100 writers and editors of stock market newsletters reports bullish sentiment climbed  this week to from 57% to 59.4%. That’s the highest level since September 2018 when the bulls hit 60%. And that was followed by a major downturn that made 2018 the worst year in a decade for U.S. stocks.

Growing Bullish Sentiment is Indicating Stock Market is Getting Very Dangerous
Growing Bullish Sentiment is Indicating Stock Market is Getting Very Dangerous

Meanwhile bearish sentiment was virtually unchanged at 17.9%. Bearish sentiment under 20%  historically is not attractive for buying. With the increase in bullish sentiment, the spread between bullish and bearish sentiment expanded this week from +39.2% to +41.5% (see chart). Spreads over +40% mean investors should begin taking defensive measures.  Investors during big rallies lose sight of the fact that excessive investor exuberance.

See more Sentiment Updates:

Similar Posts

Investor Sentiment Indicates Stock Market Remains Precarious

ByBrad Lamensdorf

Investor Sentiment Indicates Stock Market Remains Precarious. We use investor sentiment as a contrarian indicator of market direction because the average investor historically is usually wrong.. Although the short-term CNN Fear/Greed index is now registering extreme fear on the part of investors,  we believe that as a contrarian indicator that this is not yet a…

Excessive Optimism By Options Traders is Negative Short-Term Signal for Stock Market

ByBrad Lamensdorf

Excessive Optimism By Options Traders is Negative Short-Term Signal for Stock Market.  We use a variety of  investor sentiment indicators as contrarian signals on the direction of the stock market.  Largely because most investors, including so-called “expert” money managers and brokers, usually are wrong.  One of the indicators we use is the Options Speculation Index….

Investor Sentiment Continues to Indicate Investors Should Reduce Exposure

ByBrad Lamensdorf

We use investor sentiment as a contrarian indicator of where the market is headed since investors are usually wrong. As we pointed out in last week’s sentiment report investors were registering extreme caution and fear just before the equity markets’ recent big upward moves. Now this week, continuing the trend of a week ago, investor…

Market Sentiment Indicators Warn: “Stay Cautious”

ByBrad Lamensdorf

Intermediate sentiment indicators show investors have become slightly less bullish during the past week. But viewed as contrarian indicators that doesn’t mean we’ve reached a major bottom and you should throw caution to the wind. The Ned Davis Research (NDR) Crowd Sentiment was slightly less bearish at 62% compared with the previous week (70 is…

Highly Irrational Investor Optimism  Means Stock Market is Getting Very Scary

ByBrad Lamensdorf

Highly Irrational Investor Optimism  Means Stock Market is Getting Very Scary.  We use investor sentiment as contrarian indicators of where the market is headed because historically investors are wrong.  Recent market record highs have made investors so giddily optimistic they are ignoring underlying indicators of weakness, such as the lack of breadth propelling the market…