Nobel prize-winning economist Robert Shiller described the stock market in 2000, 2007, and recently, as having reached the stage of being driven primarily by ‘irrational exuberance’ on the part of investors. He also used the phrase in 2006 to describe what was driving the housing bubble.
So where does investor sentiment stand currently?
The latest weekly poll of its members by the American Association of Individual Investors was released last night. It shows that investor bullishness is at 51.9%, while bearishness has dropped to 19.2%. As long-time readers know, our work considers the poll to have reached its danger zone when bullishness reaches 50% to 55%, and bearishness drops below 20%. It reached 44.7% bullish and 21.2% bearish just prior to the June/July pullback. But it is not at record levels, having exceed 65% bullish a few time in the past.
The VIX Index (also known as the Fear Index) remains very low in its no fear (high bullishness) zone. But it has been since 2012.
However, the Credit Suisse Fear Barometer has reached its highest level ever. It is primarily based on Put/Call ratios.
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Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!
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