Wall Street Hasn't Been This Biased Since Before Black Monday

Investors Intelligence (II) bears are at the lowest point in 30 years

Jan 18, 2018 at 8:17 AM
facebook X logo linkedin


With U.S. stocks on a historic tear to start 2018, signs of extreme stock market optimism continue to pop up. For instance, a recent American Association of Individual Investors (AAII) survey recently sent up a "huge caution sign" for stocks. Now, the latest Investors Intelligence (II) survey indicates that stock market bears haven't been this AWOL since 1987 -- the year of the "Black Monday" crash.

II Bears at Lowest Level Since February 1987

The weekly II survey showed the percentage of self-identified bullish advisors rose 2.3 percentage points last week, to 66.7% -- that's the highest level since March 1986. The average II bulls reading is 47%, looking at data since 2005, per Schaeffer's Senior Quantitative Analyst Rocky White.

Likewise, the percentage of self-identified bears fell by 0.8 percentage point, to just 12.7% -- the lowest reading since February 1987. That's roughly half the average bearish II reading of 25%.

Bulls-Minus-Bears Line in 99th Percentile of All-Time Readings

Last week, the II bulls-minus-bears line topped 50% for the first time since 1987, and is now at its highest point since March 1986, at 54% -- the 99th percentile of all-time readings. Since 2005, the bulls-minus-bears line has been just 22%, on average.

II stats since 2005

There have been just seven other times in history when the II bulls-minus-bears line moved above 50% for the first time in at least six months. Aside from signals in 1986 and 1987, there was a cluster of signals in the early 1970s, as well as a pair of signals in 1964-1965.

SPX after II bulls-bears tops 50

S&P Returns After Bulls-Minus-Bears Line Tops 50%

While the average one-month post-signal return of 1.12% is higher than the S&P 500 Index's (SPX) average anytime one-month gain of 0.6%, looking at data since 1964, the index's longer-term returns leave much to be desired. Six months after a signal, the SPX was up 2.47%, on average, compared to an average gain of 3.9% anytime. Further, the average post-signal gain of 3.52% a year after II signals is not even half the S&P's average anytime one-year gain of 7.89%.

spx II vs anytime

Still, while the S&P 500 has generated weaker-than-usual returns after a high bulls-minus-bears reading, the January Barometer is still very much in stocks' favor, as White recently pointed out. However, those concerned that overbought stocks are due for a breather may want to heed founder and CEO Bernie Schaeffer, who recently noted that options hedges against a correction are priced to move.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI