Friday Market Sentiment
Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |
The bloggers, individuals and newsletter writers have all become very bullish and very quickly, and from a contrarian sentiment point of view, it is negative towards stocks. The individuals and bloggers were very negative towards stocks during the entire bull rally from late summer 2006 through the sell off in July of this year. But they really seem to like the current rally? Maybe they are seeing the light at the end of the tunnel ahead for the housing crisis? More likely, they regret being on the wrong side of the market for so long and have decided to adhere to ... don't fight the tape and don't fight the Fed.
The put/call ratio is still very bullish from a contrarian sentiment point-of-view. Generally, the lows in this put/call moving average have been good times to start thinking about getting defensive towards the market. This chart shows the put/call ma hasn't really even started to roll over yet, which is usually a bullish sign.
The survey information above can be obtained for free via the following sites. Investor's Intelligence is from Market Harmonics. Individual Investors is from aaii.com. Low Risk is from lowrisk.com. Birinyi Bloggers is from Ticker Sense. For additional information about market sentiment, I recommend a blog by Brent Leonard.
Sentiment analysis is an important component when following the markets, and is considered a “contrary” indicator. Contrary because if too many people are bearish then there aren't enough sellers left, the balance tips to buyers, and the market starts to advance. If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens. One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.
Keep in mind, sentiment analysis is not a science and only provides very general information. Sentiment is not a signal to take action, but provides background about the current state of the markets. For instance, there have been many occasions when bullishness reached high levels well before the market started to weaken.
