Market Sentiment Gauges Suggest Caution

Intermediate-term sentiment gauges are at lofty levels, signaling investors should be very cautious. Investors Intelligence is reporting that 59% of the more than 100 market newsletter writers it follows are bullish and 18% bearish. That is a strong warning signal since these writers historically have been wrong about market direction. We should note that the last time bulls topped 60% was in October 2007, near then end of a long bull market.

Another warning sign:  Ned Davis Research (NDR)  crowd sentiment is at 69, very close to 70, which is a sell signal.

As for short-term market sentiment, the CNN Fear/Greed Index moved up to an extremely greedy 76, yet another warning sign, from a contrarian point of view. The NDR short-term gauge at 56 was leaning to the bearish side, but unchanged from the previous week.

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