Investor Sentiment on Stock Market Remains in Caution Zone. We use investment sentiment as a contrarian indicator of market direction because investors are usually wrong. As a result, investors tend to buy on the high side and sell on the low side. Professionals use sentiment and other market indicators to determine when markets are overbought or oversold to maximize profits and protect assets. Investor sentiment indicators this past week remained in the caution zone, although slightly less bullish than the week before.
The Investor Intelligence poll of market newsletter writers shows the bulls retreating to 53.3% from 54.8% last week , and their previous 2019 high of 58.1% before that. Bullish sentiment above 50% indicates investors should remain cautious. Bearish sentiment was basically unchanged at 17.2% vs. 17.3% the previous week. Anything under 20% historically means it is not a good time for buying. The bull-bear spread (see chart) contracted to +36.1% from +38.0% a week ago. Spreads above 30% signal increasing danger the higher they go up.