Bullish Sentiment Stampede
I have mentioned several times recently that bullish sentiment is extreme. If anything, "extreme" seems like an understatement as noted in Bullish Sentiment: Turning into a Stampede?
The latest Elliott Wave Theorist reports that a "bullish consensus" has also crystallized among a wide range of investors and financial professionals:Sentiment Not a Timing Indicator
- "Individual investors (AAII poll)—most bullish in six years
- Newsletter advisors (I.I. poll 20-week average)—most bullish in seven years
- Futures traders (trade-futures.com poll)—most bullish in four years
- Mutual fund managers (% cash)—most bullish ever
- Hedge fund managers (BoAML survey)—most bullish ever
- Economists (news-org polls)—unanimously bullish
- Top global strategists (three national year-ahead panels)—unanimously bullish
- Even most 'bears' on the economy are bullish on stocks because of inflation!"
Patterns of investor psychology are not new. In fact, they repeat themselves. Consider this quote in 1960 from Richard Russell of Dow Theory Today:
"Psychology during bear market rallies seems to follow a fairly consistent pattern. 'During secondary reactions [upward] in bear markets,' wrote [Robert] Rhea, 'it is a fairly uniform experience for traders and market experts to become very bullish.'"
Those words are as true today as they were 50 years ago.
Sentiment is never a timing indicator because things always go further in both directions than people think.
Regardless, I am sticking with my assessment this is not a good time to be long the market. In case you missed them, I gave my rationale in a couple of recent articles.
- Negative Annualized Stock Market Returns for the Next 10 Years or Longer? It's Far More Likely Than You Think
- Anatomy of Bubbles; Negative Returns for a Decade Revisited; Is Gold in a Bubble?
Please note that "not a good time to be long" is not the same as a "good time to be short". It may or may not be a good time to short.
However, the longer the "Bullish Sentiment Stampede" lasts, the better the odds. Finally, if you missed the rally and are thinking of getting in now, I have a one word suggestion: "Don't".
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Disclaimer:The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.