They Are Bullish

There are an increasing number of sentiment indicators that are pointing to high levels of bullishness:

  • The amount of money in bullish Rydex funds versus bearish is within spitting distance of an all time record.

  • Hulbert Nasdaq market timers are recommending a 64.7% net long. They have gotten as high as the mid to high 70's but is clearly in the high end of bullishness

  • Last week we had a 52 week high in call buying at both the ISE and CBOE

  • The Investors Intelligence bulls are above 54%, which is approaching the danger zone. Unfortunately the bears are still above 24%. The best signal is when the bears are below 20%.


We have seen numerous rallies in recent years where the extreme bullishness did not matter for a long time. However, eventually the extreme bullishness did matter and all the gains were subsequently taken away. If we are not in extreme bullish territory than we are on the precipice.

4 comments:

dreverts said...

I know you follow sentimentrader.com, he still has market participants not being complacent (5/10). Also, hedge still appear to be underweight. Did you take both into account by saying we are approaching extreme bullishness? thanks

Tsachy Mishal said...

I use the data on the SentimenTrader website but I don't defer to his opinion. I reach my own conclusions. Most of the indicators I follow are either in extreme territory or very close.

Unfortunately, there is no way to know how hedge funds are positioned precisely but I have come across data recently that has shown that hedge funds have significantly increased their net exposure recently. Anecdotally, it seems they have upped their exposure as well.

Investment Reading and Finance Links – September 21, 2012 said...

[...] They Are Bullish – Capital Observer [...]

Excess Bullishness said...

[...] Last week I pointed to some signs that the crowd may have turned excessively bullish and  since then some more signs have piled up. [...]