Even though I don’t think the stock market is on the verge of a crash there is one bad thing happening that I would be derelict in my duty to not point out to you.
That is the fact that investor sentiment remains bullish and has not been fazed at all by these recent market drops!
This is the latest Investors Intelligence survey that came out on Wednesday.
As you can see there is a very slight dip in the number of bulls while the bears didn’t go up at all.
However, that dip is still at an almost record level!
At major bottoms we have actually seen the number of bears outnumber the number of bears.
It got that way actually at the bottom in 2016 in January of that year and back in 2011.
Well we are a long way from that happening and I’d hate to think about what it would take to get there.
The thing is we hit a record level of divergence between the bulls and bears in this indicator just two weeks ago.
That was a troubling sign and it preceded the drop.
But no one is worried at all.
Really there are no bears.
And ask yourself have you talked to a single person in the past week who has told you that they are worried about the stock market and thinking about selling?
I haven’t even gotten an email from one single person talking about selling.
This doesn’t mean the market is going to crash.
But it just shows how bullish sentiment remains.
I wrote about my take on the real reason the stock market dropped a few days ago and still stand by that.
We may go lower, but it won’t be the end of the world if we make a minor new low.
I never thought we’d have an instant turnaround and corrections usually take a few weeks to play out.
The 50-day moving average got taken out and it’s time to have some turmoil around the 200-day moving average. That’s classic technical analysis.
What will be key for later analysis is to see what sectors hold up the best at the end of a drop and what sectors remain below those moving averages after breaking them.
As far as this sentiment indicator being a bad thing for the stock market it is.
But it may not matter that much at the moment and mean everything before the year is over.
I also did a quick interview for the Jim Goddard show Wednesday after the close on my thoughts of where this is all going.
To listen to that click here.
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