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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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