SENTIMENT NUMBERS

Overview
Despite an eight day winning streak for the DJ Industrials the number of bullish advisors slipped a bit and there was a sizable increase for the bears. The bears rebounded after one week below the 20% level, a reading not seen since October 2007. A few editors noted that September is one of the worst months of the year for stocks. It is also followed by October, which has seen a number of unpleasant market occurrences over its history.

The bulls moved down to 50.6% after reaching a twenty-month high at 51.6% the previous week. That was more than double the reading of 22.2% shown at the first bear market bottom last October. We counted only 23.1% bulls at the second November low. The final March index low showed 26.4% bulls for a divergence that told us the bottoming action was complete.

The bears rose to 24.1% from 19.8% the previous week (a 34.6% decline from their highest level in the bear market, shown last October at 54.4%). The November and March bear counts were 49.5% and 47.2%.

Most of the new bears shifted from the correction camp, which ended at 25.3% from 28.6% a week ago. This group often appears to be 'hedging their bets' and is an intermediary's stop on the way from bearish to bullish or vice versa. Following the event a 'correction' advisory can usually say he was almost correct in his outlook.

We continue to rate the sentiment as bearish. The recent and current optimism means the advisors have been recommending equities to their readers who shouldn't have a lot of cash left on the sidelines (assuming they've been following the advisors view). Negative sentiment doesn't always means a sharp, immediate market drop, but it is a sign of elevated risk. Close attention is needed to preserve gains.

The difference between the bulls and bears narrowed to 26.5%, down from 31.8% last week. That is a small improvement but those readings are also typical of market tops.