Market Sentiment Over-Bullish; Due For Correction

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Several sentiment indicators are signaling that the markets are overbought. ITZ takes a look at the $SPXA50R, $SPXA150R & $SPXA200R stocks trading over their respective 50, 150 & 200 day moving averages.

The AAII Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months; individuals are polled from the ranks of the AAII membership on a weekly basis. Only one vote per member is accepted in each weekly voting period.

 

The Bullish Reading peaked a few weeks ago over 50%, although not a perfect timing indicator...it raises a caution flag that a reversal lower is over due.

 

NAAIM member firms who are active money managers are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day of the week, currently Wednesdays. Responses can vary widely as indicated below. Responses are tallied and averaged to provide the average long (or short) position or all NAAIM managers, as a group.
Range of Responses:
200% Leveraged Short
100% Fully Short
0% (100% Cash or Hedged to Market Neutral)
100% Fully Invested
200% Leveraged Long

 

The green line shows the close of the S&P 500 Total Return Index on the survey date. The purple line depicts a two-week moving average of the NAAIM managers’ responses.