One of the refrains we have heard lately is that “Everyone is too bullish.”
Looking at the data, we find that the sentiment is decidely mixed — perhaps the best word is Neutral.
Consider the various data points:
• Investor Intelligence Newsletter Survey has Bulls 40.4 v Bears 31.5 — this is the lowest level for the bears since June 2008. (See chart below). Overall, this is in neutral territory. It is neither excessively bullish (see October 2007) or excessively Bearish (see October 2008).
• The % of NYSE Stocks above their 200-Day Moving Averages was deeply oversold at just 1% in March — its now just under 40%.
• Consumer Confidence has been extremely low, and is now moving off of those levels;
• Earnings expectations have also been quite low — possibly too low. For the first time since the bear market began, earnings on the SPX are beating consensus;
• Money Market Cash as a percentage of total Market Value peaked in March at ~44%; Its down to 38% as of the end of April, significantly above historic levels;
• Cash in individual investor portfolios remains significantly above the 21.5 year mean of 25%; Its down from 44%, but remains elevated at 34%;
There are two pieces of anecdotal data worth sharing:
First, we have heard that Individual Investor trading volumes are much higher, while Institutional Traders are unchanged. This is consistent with the so called “Junk stocks” leading the rally off of the March lows. A variety of single digit midgets (C, AIG, ABK, BAC, FNM, etc.) are all appreciably higher. That implies this is a speculative, flyer led rally.
Secondly, there is a WSJ article today: Brokers Abandon Wall Street:
“The number of brokers bolting from Wall Street is on the rise amid slumping markets and diminishing fees — a trend that could augur lasting changes in the way individuals invest.
In April, more than 2,800 people registered as brokers in the U.S. left the industry, according to the Financial Industry Regulatory Authority. The total number of departures so far this year stands at 11,600. In 2002, the previous high-water mark for industry exits in the 15 years of data available from Finra, a total of 11,500 brokers left Wall Street.
The bottom line: Sentiment data is off of the extreme levels we saw at the lows in March; however, it has not yet reached levels that are associated with excessive bullishness.
Fascinating stuff . . .