Current sentiment

The everybody is bearish talk has died down lately.  Is everybody bullish now?  Lets start with the put/call ratio.

I have circled the bigger pullbacks in the market and the matching 10 DMA of the put/call ratio values.  In the last three years the 10 DMA has only gotten down to this area four other times.  Three of the four times the market sold off in short order.  Only the late 2010 occurrence had the market continue up for a while.  The put/call ratio is showing a lot of bullish sentiment.  Clearly there is risk going long here.

Next up is the latest NAAIM survey.

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The active money manager survey is showing these guys are heavy long.  This is in the area of all the prior peaks on this chart.  There is not much fuel left here for the upside.  There is lots of downside fuel should something happen that causes them to sell.

Here is the II survey.

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This one is showing a lot bullishness also.  It is getting up into the area where it has been maxing out.  Probably not much upside fuel left in this one either.

Here is the AAII survey.

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Clearly this one is showing more bulls then bears, but not overly bullish.  In fact, it is below the long run average of 39% bulls.  The peak sentiment on this rally is much lower then on all the other big up moves since 2009.  Clearly individual investors are not overly bullish here.  However, at the top last year and this year before the spring sell off, they were showing much less bullishness then other surveys and they were correct.  There is upside fuel here should individual investors pile into the market.  The flip side to that is they could be right again in being less bullish here.

The last one is the Nova/Ursa ratio.

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The data in this one is really raggedy.  To tell you the truth I am not real sure this is accurate.  I have never seen it look like this before.  I don't know if there is a data error or if people are really totally and completely confused.  I am confused looking at it.

The bottom line is several sentiment indicators are showing people are overly bullish.  The long side is a crowded trade despite what the media would have you believe.  There certainly has been a lot of bear capitulation the last couple of weeks.  That is pretty common at major turning points.  Some people see that the fundamentals are changing, but loose courage of their conviction in the face of the market going contrary to what they think it should.  This is where the old saying "the market can stay irrational longer then you can stay solvent" came from.  The market always seems to pay attention to fundamentals eventually.  Despite unlimited money printing from the FED, I expect this time to be no different.  It will take a change to the positive for corporate earnings to sustain current prices for the long run.  That change is not evident at the moment.

Bob