Strong Stock Market Breeds Bullish Extremes

According to the Investors Intelligence (II) sentiment survey, the percentage of bullish advisors is at its highest level since 1987

Mar 1, 2017 at 3:08 PM
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    With the stock market racing to record highs on a renewed "Trump rally," a number of sentiment surveys are hinting at extreme optimism. And while caution should be exercised -- lest traders be caught off-guard by a volatility pop -- there's no sense in fighting the tape, when the Dow only recently concluded its longest streak of record closing highs since 1987.

    Speaking of 1987, in the latest Investors Intelligence (II) sentiment survey, the percentage of bullish advisors rose 1.9 percentage points to 63.1% last week -- the highest level in 30 years. The bulls-minus-bears line is above 40% for the 11th straight week -- also the highest point since 1987, according to Schaeffer's Quantitative Analyst Chris Prybal. Meanwhile, self-identified bears fell to 16.5%, the lowest level since July 2015.

    investors intelligence sentiment survey bulls bears spx

    Echoing the survey above is the National Association of Active Investment Managers (NAAIM) exposure index. Last week's reading came in at 100.83 -- the highest level since late 2016. Moreover, the 10-week moving average, at 97.1, is just off its loftiest level in history, according to Prybal.

    naaim exposure index

    However, the American Association of Individual Investors (AAII) weekly sentiment poll shows something different. It's now been 112 straight weeks where the percentage of bulls has been below 50% -- a record (the survey began in 1987), and a potential buy signal for stocks, if past is prologue. That said, the percent bulls did just increase by 5.4 percentage points, which is the largest increase since November, per Prybal, so perhaps the tide is finally staring to turn.

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