SENTIMENT NUMBERS

The advisors reacted quickly to the markets fast recovery from the one-day sell off on August 17. Last week we noted some modest calls for corrective trading after the sharp July and August advance that extended the strong rally from the March bottom. They described the conditions as extremely overbought and noted that the end of the recession might not be proceeding as planned. However, with averages heading back to their highs, the editors expressed renewed optimism with the latest sentiment readings.

The bulls jumped 3.3% to 51.6%, from 48.3% the previous week. That was above their recent peak of two weeks ago and their highest level since December 2007 when they were retreating from the 62.0% at that October's record market high.

The bears fell by the same amount to register 19.8%, dropping from the 23.1% in last weeks report. That was the fewest negative advisors since October 2007 when they numbered just 19.6%.

Advisors classified as correction were steady at 28.6%. Their number holds above the bears for the fourth week in a row, and now by a margin of almost 10%. This group is mostly bullish but they expect an intervening market retreat before the rally begins. They look to buy on dips. Advisors often shift to correction before they take a more definite stance.

Sentiment is clearly negative with readings similar to those shown at the end of 2007. The markets reached all-time highs that October and were just starting to retreat from there by the end of the year. That reminds us that the current sentiment doesn't mean an imminent market collapse. It does strongly suggest averages are close to their highs for the current move and much of the 'easy' gains have occurred.

The difference between the bulls and bears was +31.8, expanding to the widest positive margin since late 2007. The spread moves deeper into negative territory at +20 and higher.