Stock market sentiment playing out as it should

Stock market sentiment became over bullish and risk spiked

Here is NFTRH 745’s take on stock market sentiment into this week. It is as it has been for a few weeks now, but the over-bullish backdrop curiously persisted despite stocks having been in consolidation for all of February, until they broke down today.

Incidentally, my side note on bonds being contrary bullish got refuted today. So much for sentiment as a timer (it’s not).

US Market Sentiment

As you can see, the week ended with market sentiment still unfavorable from a contrarian standpoint. Dumb money is only now starting to roll over. I see 5 waves up on the chart above and maybe that is all she wrote. It could also be an A-B-C bear rally having completed. This persistence in over-bullishness despite the unspectacular rally to date breeds thoughts like that. Sentiment is not a timer, but it is a condition and in this case ‘over-bullish’ is a condition to a potential top.

As a side note, check out the extreme contrary positive sentiment situation in bonds. That is a sentiment-based rationale indicating that maybe the bond funds in the NFTRH+ update linked above may indeed hold as macro indicators. Wildly over-bearish sentiment can’t hurt, at least.

Smart money and dumb money sentiment
  • Investors Intelligence (newsletters): Spiked to a new recovery high as of Feb. 14. Not extreme, but not contrary positive either.
  • AAII (Ma & Pa): Also spiked to a new recovery high as of Feb. 15. Not contrary positive in the least.
  • NAAIM (investment managers): Spiked to a new recovery high as of Feb. 15 and is briskly bullish. Guys, I was half joking when I first ID’d the Inverted H&S potential on SPX back in December! It is delineated on the lower panel chart of SPX and is the main reason we allow for a more significant bear market rally.
naaim sentiment

For “best of breed” top down analysis of all major markets, subscribe to NFTRH Premium, which includes an in-depth weekly market report, detailed market updates and NFTRH+ dynamic updates and chart/trade setup ideas. Subscribe by Credit Card or PayPal using a link on the right sidebar (if using a mobile device you may need to scroll down) or see all options and more info. Keep up to date with actionable public content at by using the email form on the right sidebar. Follow via Twitter@NFTRHgt.