Market Sentiment

As of last weekend this was the picture (from NFTRH132).  Today's rally is in keeping with a 'rat' that alert bears may have smelled in the dumb money sentiment data.

Broad Market Sentiment

As of last week the Investors Intelligence Bull ratio at 77% was at an extreme not seen

since the first big upward thrust out of the cyclical bear market in 2003. Newsletter

writers are generally very bullish and as usual, trend following. In contrast, the AAII

individual investors are way off their high bullish percent above 60, currently down to

42% apparently thinking that Japan marked the end of the bull. As of April 7 NAAII

investment managers were building back their courage after apparently falling for the

idea that alarming news can move markets in a fundamental way. They are now busy

managing peoples’ money back into the markets.

The bottom line is that there is nothing terminal going on here, when you consider that

the II Bull ratio will always be red-lined bullish at major tops, but it is a case of nothing

more serious. A significant market top will happen in tandem with extremely bullish

newsletter writers, but a herd of extremely bullish newsletter writers does not mean that

the market is going to top any time soon. Just look at the 2003 extreme and what

followed over the next four years.

From a sentiment perspective, risk is not particularly high at this time, and an educated

guess tells me that Japan had a lot to do with this in perhaps a similar way to last spring’s

‘flash crash’ and its launch of the huge rally that technically continues to this day.

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