Stock market traders and investors should be aware, the bear may be about to come out of hibernation.  Here is the latest Investors Intelligence report along with the all-important sentiment chart:  “Modest additional index gains occurred last week as the primary indexes continue to trade around their best levels from 2012.  They have been unable to follow the smaller-stock averages to all-time record highs. 

Indicators remain overall bullish but more charts reached the levels of their prior tops so the short term risk remains high and intact.  Those facts are noted by the advisors but only a few reacted with weekly shifts.  The end result was ... bulls at lofty levels and showing a wide negative spread from the bears....

Continue reading the Investors Intelligence piece below...


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“With no change the bulls held at 53.2%, and almost up to clearly negative levels.  They have increased considerably from mid-Nov's reading at 37.3%, which showed almost the same lack of optimism that occurred mid-June.  Those were the two solid buying chances in 2012.

Now we count almost as much optimism as in Sep and Feb-12.  Those two market tops saw the bulls just under 55%, that danger area has almost been achieved again.  Those readings suggested at least caution, which is called for again.  There could be still more bulls if the quarterly results continue to beat forecasts but some advisors are also adding some caveats to their overall positive outlook.


The bears remained at their seven month low of 22.3%.  The market strength all of last year held their reading below 30% and the recent data moved close to their 20.4% worst level from late Apr/early June.  Low bears/high bulls suggests lots of funds have moved into equities.  The stubborn remaining bears express concerns over the reality of the US recovery.  They still expect a recession in Europe and mention potential for conflicts in Asia to hold back that region's recovery. 

Of course there was the same number of advisors looking for a correction, at 24.5%.  That is the fewest since 14-Sep when their number fell to 21.3%.  That was the last market high when optimism was also rampant.  Of course there was a sell-off as the markets most often confound what most people expect.

The flat readings for bulls and bears left their spread at 30.9%.  Last week that difference entered dangerous territory at around 30%.  It was 29.7% on 16-Sep and 31.2% on 30-Mar last year.  Both proved to be attractive periods to take some chips off of the table. 

The stock market may not sell-off immediately but the likelihood that shares will be lower in 2-3 months time has increased notably.  The current spread is up from just 9.5% mid-Nov.  Low ‘positive' readings often coincide with correction bottoms while large market declines see more bears than bulls (a negative spread) for even better buying opportunities.” 

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Eric King

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