“Any way you look at it, the treacherous stock market has reached its goal – it’s turned the crowd bullish,” said long-timer Richard Russell (Dow Theory Letters). “Nearly everybody I read or talk to is convinced that we’re in a new bull market – a primary bull market which they claim started at the March 2009 low.”
In addition to fundamental and technical analysis, it is particularly important to measure the crowd’s sentiment regarding extreme bearishness or bullishness. A convenient tool for this is provided by the Investors Intelligence survey of investment advisors.
According to the latest reading, 48.3% of advisors are bulls (up from 34.1% in February) and 19.1% are in the bear camp (down from 27.8% in February). “The difference between the bulls and bears is +29.2%, up from the prior +28.4% and still moving in the wrong direction. Danger is signaled at around 35%,” said the report.
Although investment advisors are overbullish, the level has not yet reached the danger zone. However, given the overbought and overvalued condition of the US stock market, I am holding a defensive stance here.
