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Sentiment Has Taken A Turn For The Worse

  • Written by Syndicated Publisher 40 Comments40 Comments Comments
    December 23, 2010

    The Wall of Worry that existed as recently as earlier this month has now largely disintegrated — and given way to the veritable Slope of Hope on which market declines typically thrive.

    Consider the average recommended equity exposure among a subset of short-term stock market timers, who focus on NASDAQ stocks (as measured by the Hulbert NASDAQ Newsletter Sentiment Index, or HNNSI). This is a useful sentiment measure on which to focus, since the NASDAQ market is one in which sentiment plays a particularly large role (remember the Internet bubble?)

    The HNNSI currently stands at 73.3%, which is disturbingly high. The only other occasions this year when this sentiment benchmark got any higher were early November and late April/early May. Both occasions turned out to accompany stock market highs — and in the earlier case came immediately before the infamous Flash Crash and severe May-June correction.

    Other sentiment measures are telling a similar story.

    One is the weekly survey of investment advisers compiled by Investors Intelligence. Its latest reading, from earlier this week, shows a slightly higher level of bulls today than existed at the April market high. In fact, Investors Intelligence is reporting that the current level of bullishness is the highest since December 2007. Of course, that earlier period of excessive optimism came just as the 2002-2007 bull market was rolling over into a severe bear market.

    Keep reading this article here

    via Sentiment has taken turn for the worse Mark Hulbert – MarketWatch.
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