Edge:
The sentiment indicators from Barron's 4/13/98 are:
Bull Bear Other
Investors Intelligence (914) 632-0422 52.4 % 24.2 % 23.4 %
AAII Index (312) 280-0170 41.0 % 23.0 % 36.0 %
Consensus Inc. (816) 471-3862 80.0 %
Market Vane (818) 395-7436 63.0 %
average of bullish in the 4 surveys: 59.1
For comparison, the peak bullishness before the last correction was
in mid July of 1997. That was 62.5% bullish, averaged over the 4
surveys, on July 18. (The market corrected by 7% one month later, and
bullish sentiment dropped to 40% in early September.)
The previous correction, in march/April 1997, was preceded by a
bullish peak of 59.75% on Jan. 27, right when small stocks hit their
peak.
So far in this rally, we've been hanging out with sentiment levels
staying high in the 57% - 60% range since Feb. 22.
The peak bullishness was March 8 at 61.2%,
followed by a dip to 57%, and another peak at 60% on April 5.
Both of these peaks were higher than the 59.75% peak before the
April 1997 correction, and nearly as high as the 62.5% before the
correction last fall.
All in all, the bullish sentiment indicates that a top is
likely in the next few weeks. Even so, the correction doesn't have to
be big (see the 7% correction in the S&P Fall '97, which was
'predicted' by the sentiment indicators, but was too small to have
made it worthwhile to have moved out of stocks.)
I still think that sentiment indicators are semi-decent at predicting
tops. |
