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This Stock Market Sentiment Measure Hits a Record High

“When investors believe that a market can go only in one direction, they are likely already positioned.”

by Bob Stokes
Updated: January 14, 2020

As we entered the new decade, the Dow Industrials topped 29,000 for the first time ever -- as the longest bull market on record plows on.

That's right, the stock market has been going up for nearly 11 years!

You might think that this record-long uptrend would make investors a bit cautious.

But, in many quarters, stock market sentiment remains elevated. Here are a couple of samples from the financial press:

  • Tech Valuations Are Stretched, But Investors Are Still Bullish, Survey Finds (Barron's, Jan. 6)
  • 11 S&P 500 Stocks That Could Soar 20% or More in 2020 (Kiplinger, Jan. 10)

Also, our just-published January Elliott Wave Financial Forecast showed this chart and said:

RydexTotalBullBear

The stock market now rests upon a rare extensiveness of bullish expectation... The chart shows [an] indicator tracked by SentimenTrader that has just hit an all-time high. On December 26, Rydex investors held $28.17 in S&P 500 and NASDAQ 100 funds for every $1 in their bearish counterparts. The prior reading that came closest to the current one was $27.3, which occurred on January 31, 2018, five days into the start of [a sharp stock market decline].

Does this mean that the broad market is poised for a quick 10% correction, like what occurred within a two-week period from late January into early February of 2018?

Well, the Rydex Total Bull/Bear Ratio is not intended for short-term timing, However, the historical facts speak for themselves.

Plus, our observations over the decades reveal that extremes in sentiment usually serve as a contrarian indicator.

As a classic Elliott Wave Theorist notes:

When investors believe with deep conviction that a market can go only in one direction, they are likely already positioned. That's when the smallest tip of the balance can start a movement in the other direction.

Now is the time to get our complete analysis of the U.S. stock market, which includes short- and longer-term forecasts.

You can do so without risking a penny. Follow the link below to learn more.

“Traders Are Super-Charged About Speculating”

That's a quote from our just-published January Elliott Wave Financial Forecast, which also says:

From December through early January, investors' desire to speculate has been in overdrive. Stocks rallied, gold rallied, oil rallied, commodity indexes rallied and the lowest-grade of bonds, those rated CCC, rallied too, outperforming high grade bonds.

The January Elliott Wave Financial Forecast identifies this speculation for what it is -- and, elaborates on what it means at this juncture.

Also, check out a Special Section on financial assets in 2020 -- a must-read.

You can do so via our 30-day, risk-free trial. Click the button below to get started.

EXCLUSIVE

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You can greatly boost your confidence in an Elliott wave count when you combine it with a popular technical indicator like the Relative Strength Index. Log in -- or sign up for FREE -- to watch our "How to Win in FX and Cryptos" course instructor show you how in this quick video.

EXCLUSIVE

"349.22: The Key to the Puzzle"

Bull or bear? Investors want to know! Elliott waves often let you draw a clear, firm "line in the sand" that shows you if the larger trend is up or down. Watch our Head of Global Research explain using today's picture in a key European index.

EXCLUSIVE

The "Little Guy" Is Fully Committed to This Rally

Investor sentiment is one of the bedrocks of market trends. A sub-trend of the broad sentiment is that of "the little guy," the small traders. Watch our Global Market Strategist explain what the current "little guy" sentiment tells you about the market's next move.