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Next Time You See “4 Times as Many Bulls as There Are Bears,” Remember This

See how stock investors’ “historic optimism” served as a warning

by Bob Stokes
Updated: July 20, 2021

After a 12-year uptrend, just when caution might be in order, investor psychology has remained highly and stubbornly optimistic.

As our July Elliott Wave Financial Forecast said:

Large traders are more exuberant than ever. On June 11, large trader buy-to-open call purchases jumped to 45%, a new record.

A highly bullish outlook was also expressed in this July 10 Marketwatch headline:

The bull market in stocks may last up to five years -- here are six reasons why

Notice that the headline's suggestion is that the bull market has just started.

That five-year forecast might turn out to be correct -- but then again, keep this in mind from an earlier 2021 Financial Forecast:

A top never feels like a top. The bigger they are, the more permanent they seem.

And here's yet another recent look at sentiment via a chart and commentary from our July 14 U.S. Short Term Update:

HistoricOpt

The most recent result of the weekly Investors Intelligence Advisors' Survey (InvestorsIntelligence.com) shows that the percentage of bulls rose to 61.2%... With the percentage of bears dropping to just 15.3%, there are now four times as many bulls as there are bears. Since the stock market crash of 1987, a span of a Fibonacci 34 years, only 1.5% of the total weekly readings in the II bull/bear ratio have been higher than the 4-to-1 ratio of this past week.

Interestingly, just two days after this analysis published, the Dow Industrials dropped nearly 300 points on Friday (July 16) and on the following Monday, as of this writing, the Dow has tumbled more than 900 points.

To stay independent from the sentiment of the crowd, it's a good idea to employ Elliott wave analysis and other technical indicators. They will help you stay on track -- objectively, independently from the "bullish" news that inevitably fools the crowd.

You can find our Elliott wave analysis of the stock market in our flagship investor package, which includes the U.S. Short Term Update, the Elliott Wave Financial Forecast and the Elliott Wave Theorist.

Just follow the link below.

Gold Has Traced Out a Signature Elliott Wave Pattern

That Elliott wave pattern is crucial to know because it strongly suggests what's next for the precious metal -- plus, that pattern reveals gold's main trend.

You can get timely insights about gold and silver in our July Financial Forecast Service -- plus, if you're a stock investor, you'll find a section titled:

Momentum Considerations

Remember, "momentum" is one of the three fundamentals of stock market forecasting described by Elliott Wave International President Robert Prechter in an Elliott Wave Theorist:

The three pillars of market analysis and forecasting are patterns, momentum and sentiment.

Get our analysis of the stock market and precious metals by following the link below.

U.S. Stocks: Wave “Pattern Completed at 4 Degrees of Trend”

"Things will change over the course of the next few years," says our Financial Forecast co-editor Pete Kendall in this new interview. Hear it for yourself.

Microsoft (MSFT): Where Market "Fundamentals" Fail, Elliott Waves Prevail

September saw tech giant Microsoft Corp. in freefall, a rout ending September 30 at the stock's lowest level since March 2021. Oddly enough, the decline occurred amidst "fantastic" figures of growth and productivity. If you can answer the question, "Why did prices fall despite bullish 'fundamentals?'" you've got the job!

EXCLUSIVE

MSCI Taiwan, KOSPI: Looking at U.S. Dollar to Understand Stock Trends

The Asian-Pacific stock markets have been showing a clear correlation with the trend in the U.S. dollar. Watch our Asian-Pacific Short Term Update editor Chris Carolan explain why right now, it's a "very dangerous" moment for the regional stocks.