Pessimism on U.S. Stocks Drops to Lowest Since 1987 (Update1)
By Nikolaj Gammeltoft
(Edit: Happy New Year ahead for you too,gg, at somepoint the bears will see their prophecies come true, and within this year. Imagine, we are now the least pessimistic since 1987--that being pre crash---o.k., maybe they blow this to SPX1250 early on in 2010, but mark me this year will end Ultra Ugly--i mean UGLY! First pulback would be a buy, but the trend would then be a reversal to lower highs and lower lows, and for a LOOOONG time.IMHO.Max/otherthan)
Dec. 30 (Bloomberg) -- Pessimism about U.S. stocks among newsletter writers fell to the lowest level since April 1987, six months before the equity market crash known as Black Monday, following the biggest rally in the Standard & Poor’s 500 Index in seven decades.
The proportion of bearish publications among about 140 tracked by Investors Intelligence fell to 15.6 percent yesterday from 16.7 percent a week earlier. Sentiment has improved since October 2008, when the financial crisis drove the figure to a 14-year high of 54.4 percent. After plunging 38 percent in 2008, the S&P 500 has risen 25 percent this year.
Some analysts consider lower pessimism a sign stocks will stop advancing, under the theory that there are fewer bearish investors left to change their minds and purchase shares. The S&P 500 plunged 20 percent on Oct. 19, 1987.
“Wow, I know things are better than they were one year ago, but are they so dramatically better with little downside risk?” Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York, wrote in an e-mail to clients today. “Combine this sentiment reading with the VIX at 20 and 2010 will be interesting, especially with the very likely prospect of higher interest rates.”
The VIX, as the Chicago Board Options Exchange Volatility Index is known, is posting a record annual drop as investors pay less for protection from declines in the S&P 500. It has fallen 75 percent since a record high of 80.86 in November 2008. The dollar climbed to a three-month high against the yen today on speculation the Federal Reserve will withdraw stimulus measures as the economy recovers.
10% Retreat
The percentage of surveyed newsletter writers who are bullish declined to 51.1 percent from 52.2 percent. Advisers expecting a correction, or 10 percent retreat, rose to 33.3 percent from 31.1 percent. Investors Intelligence, based in New Rochelle, New York, has examined forecasts in newsletters since 1963.
When the S&P 500 and Dow Jones Industrial Average climbed to records in October 2007, the bullish percentage was 62 percent. The S&P 500 fell 57 percent from that record to a 12- year low of 676.53 on March 9, 2009. The benchmark index has since rebounded 67 percent to 1,126.42.
The following are results from Investors Intelligence’s analysis of investment newsletters for Dec. 23 through yesterday.
This Week Prior Week Comments
Bullish 51.1% 52.2% First drop in three weeks
Bearish 15.6% 16.7% Lowest since April 1987
Correction 33.3% 31.1% Biggest increase since
Nov. 17
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
Last Updated: December 30, 2009 16:55 EST |
