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Low Bearish Stock Market Sentiment Means Investors Should Remain Cautious

We use investor sentiment as a contrarian indicator of the direction of the stock market. And this week’s low bearish sentiment means investors should be cautious. The most recent Investor Intelligence Bears/Bulls poll reports bearish sentiment at a very low 17.2%.  Virtually unchanged from the previous report.  Bearish sentiment below 20% historically means the market has not bottomed for broad buying.

Low Bearish Stock Market Sentiment Means Investors Should Remain Cautious
Low Bearish Stock Market Sentiment Means Investors Should Remain Cautious

Meanwhile the difference between bullish and bearish sentiment narrowed to +30.4%, which was better than previous polling but still in the cautious zone (see chart). Bullish sentiment tumbled all the way down to 47.6%, from 55.3%, but given high market volatility and low bearish sentiment we believe caution remains the watchword.

See Previous Sentiment Updates:

 


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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