Investor Sentiment on Stock Market Remains in Caution Zone
Investor Sentiment on Stock Market Remains in Caution Zone. We use investor sentiment as a contrarian indicator of where the market may be headed. One of our favorite indicators is the Investor Intelligence poll of more than 100 stock market newsletters. The jump in Covid-19 cases sent the stock market lower last Friday. And that caused a small retreat for the newsletter bulls to 54.5% from 57.3% the previous week. That’s just below the 55% level which indicates investors should take defensive measures. Nevertheless, bullish sentiment certainly remains too high to indicate a big rally lies ahead. In other words, at these levels, investors should remain cautious. Bearish sentiment was up slightly to 19.8% from 18.4%, Bears below 20% historically are not favorable for longs. Another note of caution comes from the bulls/bear difference, That’s despite the fact that it moved down to +34.7% from its recent high of +38.9%. (See chart below).