Friday, March 29, 2013

A muted investor response to the new all-time high

Investors remain curiously reticent in the face of a new all-time high in the S&P 500 Index (SPX).  The latest AAII investor sentiment poll showed a slight drop in the percentage of bulls to 38% from last week’s 39%.  Meanwhile the percentage of bears fell from last week’s 33% to 29%.

While bearish sentiment is admittedly low, bullish enthusiasm is also relatively muted given the extent of the market rally in the first quarter of 2013.  Bull/bear sentiment readings are similar to what they were in August 2013 after the market rallied for 10 weeks before settling into a lateral consolidation pattern for a few weeks.  This was followed by yet another rally in September.

Bottom line: Until we see a notable increase in bullish sentiment the interim market uptrend will most likely remain intact.

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