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Investor Sentiment on Stock Market Remains in Caution Zone

Investor Sentiment on Stock Market Remains in Caution Zone. We use investor sentiment as a contrarian indicator of where the market may be headed.  One of our favorite indicators is the Investor Intelligence poll of more than 100 stock market newsletters. The jump in Covid-19 cases sent the stock market lower last Friday. And that caused a small retreat for the newsletter bulls to 54.5% from 57.3% the previous week. That’s just below the 55% level which indicates investors should take defensive measures.  Nevertheless, bullish sentiment certainly remains too high to indicate a big rally lies ahead. In other words, at these levels, investors should remain cautious. Bearish sentiment was up slightly to 19.8% from 18.4%, Bears below 20% historically are not favorable for longs. Another note of caution comes from the bulls/bear difference, That’s despite the fact that it moved down to +34.7% from its recent high of  +38.9%. (See chart below).

Investor Sentiment on Stock Market Remains in Caution Zone
Investor Sentiment on Stock Market Remains in Caution Zone

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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