Long-term Sentiment Gauges Flash Warning Signs for Stocks

Short term measurement of investor sentiment remained in neutral territory this week. That makes it difficult from a contrarian point of view to predict market direction for the near future. The CNN Fear & Greed Index moved to 57 while the Ned Davis Research (NDR) Short-Term Sentiment Poll rose to 62 from last week’s 52. I would rate this neutral at best.

On the other hand, long term sentiment jumped quite a bit over the last week, flashing warning signs for stock investors.  NDR Crowd Sentiment climbed to 67. Anything near 70 or more means investors should be careful. The Investors Intelligence Bull/ Bear measurement of sentiment among investment newsletter writers moved to 55% bullish from 52%. The bears remained about the same at 19%. Since these writers are historically wrong, the Bull/Bear poll also is telling investors to watch out.

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