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This week's data from the Investors Intelligence poll showed more of the same -- increased bullishness among investment advisors, and a historically low level of bearishness. Specifically, the percentage of bulls increased for the fourth straight week, up to 58.2% from 57.1% to notch its highest reading since December 2010. The percentage of advisors describing themselves as bearish held pat week over week at 14.3% -- staying at its lowest point since March 1987.
The difference between bulls and bears widened to 43.9%, the most extreme reading since mid-June 2003. (This is above the 40% threshold, which we view as extreme optimism for this indicator.) The reading is now in the 96th percentile of all data points going back to 1972. (Last week, this difference was in the 95th percentile.)
Looking back at data since 2005, the current bullish reading is above the average of 46% (but still below the maximum reading of 63%). The bearish reading, meanwhile, is below the average of 27%. In short, there is a lot of optimism we are seeing in this poll, as the major market averages challenge psychologically significant round-number levels -- such as 16,000 on the Dow or 1,800 in the S&P 500 Index (SPX). With stocks up near historical highs, though, this type of market enthusiasm does not present as much of a contrarian concern as if we were seeing rising bullishness during a period of market underperformance.
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China's pollution problem is nothing new. The smog is so thick along its eastern coast that it not only causes headaches for travelers, but you can also see it from space. Literally. It's an issue, though, that's being addressed, whether by implementing a green-roof policy (which is facing its own set of challenges) or upping the number of solar panel installations. In fact, in November, Beijing raised its 2014 photovoltaic (PV) power station target to 12 gigawatts (GW) from the previous forecast of 10 GW. Two benefactors of this increased attention to alternative energy sources include China's own solar-panel product manufacturersTrina Solar Limited (ADR) (NYSE:TSL) and JinkoSolar Holding Co., Ltd. (NYSE:JKS).
On the charts, Trina Solar and JinkoSolar have both had outstanding years, with the equities up roughly 167% and 308%, respectively. What's more, each stock hit a multi-year high in November, before easing back to their current trading levels of $11.58 for TSL and $25.31 for JKS.
On the sentiment front, expectations for the solar power concerns have been tepid. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TSL's 50-day put/call volume ratio of 0.41 ranks higher than 95% of similar readings taken over the last 12 months. In other words, puts have been bought to open over calls with more rapidity just 5% of the time within the past year. It's a similar backdrop for JKS, as its 50-day ISE/CBOE/PHLX put/call volume ratio of 0.50 falls in the bearishly skewed 72nd percentile of its annual range.
Outside of the options pits, short sellers have targeted the stocks something fierce. Over the previous two reporting periods, short interest increased 59.8% on TSL and 66.1% on JKS. Short interest on the stocks now accounts for roughly 9% and 12% of their respective available floats.
It will be interesting to watch how China's continued attention to its unruly pollution problem impacts TSL and JKS in 2014, especially when taking into account the low expectations that surround the technical outperformers.