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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:


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.

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Yo, Non-Profits: Here's Your Strategy for 2020

Whether you run a charity, you volunteer or you love to give to your favorite causes, you can use the stock market to signal if society is feeling generous or if contributions will be harder to come by--and then you can strategize accordingly. Get the lowdown on how to foresee likely giving trends in the year ahead when you watch this excerpt from 20 Trends You Can Anticipate in 2020.

German Bunds: A Foreign Market, a Familiar Pattern

Our fans often ask, "Can I apply Elliott waves to... [fill in the market name]?" The answer is always -- yes! Use them in any freely traded, liquid market. For example, watch our Interest Rates Pro Service contributor walk you through his recent call in Bunds, Germany's equivalent of the U.S. Treasury Bonds.