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If you look at the chart below it reveals there are some serious warning signals even as many major indexes have been hitting new highs.


Here is the latest Investors Intelligence report along with the all-important sentiment chart:  Indexes gained more ground last week although their charts held steady at record levels achieved last Tuesday, 22-October.  Many indicators also moved further into overbought territory that session and then remain at those prior top levels through Monday of this week. Q3 earnings are overall beating lowered forecasts although revenue growth remains on the light side.  There was also further optimism amongst the newsletter editors with bullish levels moving to the low end of danger territory. 


After gaining more than 10% in just two weeks the bulls were 52.6%.  That is up from 49.5% a week ago and above the early August high at 51.6%.  The current reading is up from 37.1% early September that provided the skepticism that allowed for new buying.  Now the bulls are approaching their 2013 peak of 55.2%, shown with the May high.  That suggests portfolios are near fully invested with few alternatives to stocks to grow capital.  The excess optimism points to increased risk. 




The bears fell to a 2013 low at 16.5% from 18.5% the prior week.  In fact that equaled their level from April 2011, just before a 20% correction for the S&P 500.  The bulls were 54.9% that week. 


The difference between the bulls and bears jumped to 36.1%, from 31.0% last issue.  Both spreads are in negative territory above 30% and the move above 35% elevates the risk.  It is just below 36.4% difference from mid-May.  In contrast the late August spread was 13.4%, just above the 10% (or less) reading that allows for buying.  Readings now suggests traders are mostly invested.  The bears haven't outnumbered the bulls (negative spread) since Oct-2011.


King World News note:  The bottom line here is that the reading above is a very troubling sign for the bulls.  It is waiving a red flag that investor sentiment is becoming very bullish. 


To subscribe to Investors Intelligence CLICK HERE. 


© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


The audio interviews with Gerald Celente, Dr. Paul Craig Roberts, Andrew Maguire, Michael Pento, Eric Sprott, Grant Williams, Rob Arnott, Art Cashin, Bill Fleckenstein, David Stockman, Jim Grant and William Kaye are available now. Other recent KWN interviews include Marc Faber and Felix Zulauf to listen CLICKING HERE.


Eric King

KingWorldNews.com

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