SENTIMENT NUMBERS

Overview

Further yearly highs for the DJ Industrials caused a big rise in the bulls. Conversely, there was a plunge in the bears, to their lowest level since June 2004. The Dow just missed hitting 10,500, but it has been a rally with the “generals” (averages) moving ahead, but the “soldiers' (most stocks) not following along. Volume patterns have also been negative with many large traders on the sidelines. There were also another 400 stock buying climaxes which are suggestive of trading at tops.

The bulls rose to 50.6%, up from 46.1% last week and 44.4% before that. That new reading equals the bulls at the September peak and is just below the high at the end of 2007. The advisors remain very optimistic but we still haven't seen that final surge that achieves dangerous levels around 60%. Those were last seen in October 2007 when the record market readings were accompanied by 62.0% bulls.

There was also a sharp drop in the bears to 17.6% from 21.3% and 26.7% over the previous two weeks. That was a very quick 9.1% drop to show a large opinion shift by this group of editors. That was the fewest bears counted since 25-Jun-04 when they numbered 17.4%. June 2004 marked the end of a six-month consolidation following the strong rally off the 2002/2003 bear market bottom.

Advisors classified as correction fell to 31.8% from 32.6%. 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 from bearish to correction before they are ready to make a bullish commitment and vice versa. The reading last week was a 12-year high of 33.9% on 25-Sep-97.

The difference between the bulls and bears expanded to +33.0%. That is negative and moving in the wrong direction. The spread was 42.4% at the October 2007 market top.