S&P500: Bullish Sentiment Takes A Breather

New York (Apr 30)  While the S&P 500 (SPY) steered itself right into the middle of Yellowstone National Park based on April 11th sentiment readings, the market made a quick U-turn and the bears are now in the rear-view mirror. Bullish sentiment has risen from 26% to 37% in a matter of two weeks and bearish sentiment has fallen off a cliff, down from 43% bears to less than 26% bears. This has managed to push bearish sentiment from nearly 15% above its long-term average to 4% below it in a very short period of time. This is not what the bulls want to see ideally, as the wall of worry they had hoped to scale has been demolished. This does not mean the market cannot travel higher from here and make upward progress, but the AAII Sentiment Survey reading is no longer exhibiting a contrarian bullish reading.

When looking at sentiment for the market, I prefer to look at as many different indicators as possible to try and find a balanced reading. Just as a doctor would not solely use a stethoscope if you stepped in his office for a check-up, it would be irresponsible in my opinion to base all of one's analysis on a single sentiment indicator. This is why I use up to 5 different sentiment indicators (some weighted slightly more than others) to get the most reliable overall temperature reading for the market.

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