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Fiend Commentary
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The Bulls Must Be Crazy!
Ok, maybe you knew that already given that they were overwhelmingly bullish
when the Nasdaq topped 5,000 nearly a year ago. Extreme bullish sentiment
after a long and very strong rally is not unusual and is to be expected.
Of course after the inevitable crash one would expect stock market sentiment
to become less bullish and eventually even bearish. At the point of
extreme bearish sentiment, a stock market bottom could be expected.
Well, we have had the crash in the Nasdaq and the Dow has been stuck in a
fairly narrow range for nearly two years. But despite the Nasdaq's trauma
and the Dow's indifference, bullish sentiment according Investors Intelligence
hit its highest level in fourteen years! Yes, you would have to go back to
January of 1987 to find more Bulls!
This seems incredible and from what I've studied unprecedented. Other
gauges also continue to show a predominance of Bulls including the AAII Index.
I get a chuckle each time I see Wall Street Week's Elves Index which hasn't
had a bearish vote since Gail Dudack was kicked off the show just before the
stock market topped.
Other high-profile Bulls such as Joe Battipaglia and Abby Cohen have not
changed their tune one bit and remain steadfastly bullish. Maybe we would
be closer to a market bottom if you could see one of these PermaBulls turn
but I think Battipaglia recently reiterated a target of 4,300 for the Nasdaq
by year end.
At the same time, I don't really see a huge increase in the number of Bears
in terms of sentiment or analysts at large. Sure, there are plenty of folks
that jump on a stock once it has already been beaten into the ground. Cisco
got a lot of bad ink recently but a year ago everyone loved the stock when it
traded at 80 (it currently trades below 30).
Given the current sentiment, it looks like the current bear market has a long
way to go before it finally reaches a bottom. The current grinding action
could go on for months or years until we finally start to see some capitulation
amongst the Bulls.
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