Investor Sentiment Stock Market Indicators Ringing Warning Bells
History shows us that most investors get stock market turns absolutely wrong. That’s why market professionals use investor stock market sentiment as contrarian indicators, so they won’t be part of the herd. And those indicators have shown growing investor optimism about market direction and increased complacency about future volatility. Which are warning signs to take defensive action.
Among short-term indicators, the CNN Fear/Greed Index moved higher into greedy territory to 71. That means investors are becoming increasingly emotional and less rational about the chances of a stock market downturn. Another short-term warning of increasing investor complacency comes from the VIX volatility index which is at a multi-year low.
As for the intermediate-term, the Smart Money/Dumb Money confidence gauge has moved to multi year lows showing that the marketplace is getting overly bullish, yet another negative . The Investors Intelligence Bulls/Bears poll of stock market newsletter writers shows bulls at 53% and bears at 18%. That’s a plus 37% spread between the two. What does that mean? Plus 40% is a red alert warning sign, and we are getting closer to that.