Sunday, May 16, 2010

SP 500 Sentiment gauges $SPY $SPX

S+P 500 Sentiment gauges:

1)Daily Sentiment Index (DSI): 37% bulls (57% 5 day avg, 67% 10 day avg). Ten day avg peaked at 87% in mid-April. Jan-Feb correction bottomed at 40%.

2)Investors Intelligence readings (as of May 4): 56.0% bulls, 18.7% bears, 25.3% correction. We said on Wed that this was increasingly bearish. We were shocked the bulls actually rose on Wed from 54.0% last week, given the much lower market. Again, this was the most overbought since Dec 21, 2007. We await next week’s reading.

Must fall sharply. Feb low saw 34% bulls.

Long term, moves to 58-62% bulls have tended to end cycle bull markets.

3)American Institute Of Individual Investors (AAII) (as of May 6): 39.13% bulls, 28.57% bears. This week’s reading came before Thur’s collapse, but even so, it did not correct enough. Await next week’s reading, which should have more bears than bulls.

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