Well, the Market God has indeed run to 4600 (4599 precisely) today. I think MG can claim his mission accomplished. Next week or two will likely be totally a different story and I think bears will come up to take over. Here is one nice writing about which direction the market will likely go next.
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Investor sentiment is a useful fuel gauge for the stock market. Rallies occur as sentiment shifts from bearish to bullish. Declines are fueled as bulls turn to bears.
Near the end of October, the American Association of Individual Investors (AAII) reported that only 24% of survey respondents were bullish on the stock market for the next six months. More than 50% of investors were bearish. That was an extremely high number of bears.
It gave the market a full tank with which to fuel a rally.
Now though, the market is running on fumes. The AAII survey that was released yesterday shows 49% of respondents are bullish, and less than 20% are bearish.
That’s the highest percentage of bulls and lowest percentage of bears since August 2 – which was the last time the S&P 500 was trading near 4600. The index lost 250 points over the two weeks following that news.
Of course, sentiment surveys aren’t exact indicators for pinpointing tops and bottoms in the market. They’re like the little yellow light on your car’s dashboard that indicates you’re running low on fuel. You can still travel a bit farther down the road, but you need to start looking for a gas station.
That’s where we’re at with the stock market right now.
The S&P 500 has already traveled a good distance since bottoming just over a month ago. But the little yellow light has popped up on the market’s dashboard. The bulls are running out of fuel.
Don’t expect the market to just coast higher into Christmas.
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