${Html.ActionLink("My MarketWatch", "index", new { controller = "composite", area = "section", page = "my" })} | !{Html.ActionLink("Sign out", "LogOff", new { area = "User", controller = "Account" }, new { id = "signOutLink" })}
Welcome, ${UserDisplayName}
Log in
Become a MarketWatch member today
Mark Hulbert Archives | Email alerts
May 9, 2012, 12:01 a.m. EDT
Want to see how this story relates to your portfolio?
Just add items to create a portfolio now:
Create Portfolio or Cancel Already have a portfolio? Log In
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) "” Contrarians believe that a correction in excess of 10% is unlikely anytime soon.
That's because there is little evidence of the stubbornly held bullishness that is the typical hallmark of major tops. Investors may worry about a replay of the serious market breaks that began in each of the last two years around this time of year, but at least from a sentiment perspective, there is little similarity.
I argued as much a month ago, when early-April turmoil precipitated the first round of predictions that 2012 would follow 2010's and 2011's script. ( Read my Apr. 11 column, "Only modest correction ahead." )
With U.S. markets down for several days in a row, should you stay or should you go? Photo: Getty Images.
Even though stocks rose to a new bull market high on the first trading day of May, the market has declined for five straight sessions since then. So we are now in the midst of round two of such predictions.
Since I devoted my month-ago column to what my sentiment readings showed for general stock market timers, for this column I'll discuss the sentiment of timers who focus on the Nasdaq market in particular. Consider the average current exposure among such timers (as measured by the Hulbert Nasdaq Newsletter Sentiment Index, or HNNSI).
This average currently stands at just 5.9%, which means that the average timer is recommending that clients allocate nearly all of their Nasdaq-oriented portfolios to cash. No stubbornly held bullishness here, in other words.
To appreciate how different today's sentiment climate is with what prevailed in each of the last couple of years, consider the data in the accompanying table.
Two things jump out from the table. First, unlike the situation that prevailed earlier this month, the April tops in both 2010 and 2011 were accompanied by very high levels of bullish enthusiasm.
Secondly, after the first five trading days of those two years' corrections, the HNNSI had not dropped very much. In fact, in 2010 it actually grew. Since the beginning of this month, in contrast, the HNNSI has fallen quite dramatically.
None of this guarantees that the market won't suffer a serious correction, needless to say. Sentiment is not the only thing that makes the financial markets tick, after all.
Nevertheless, according to contrarians, a major top "” whenever one does come to pass "” will most likely be accompanied by a lot more bullish exuberance than we've witnessed in recent weeks. And in the wake of the market's initial decline from that top, the typical timer will stubbornly hold on to his bullishness.
Click here to learn more about the Hulbert Financial Digest.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
Avoid these 10 money mistakes your parents made
Asia stocks slump amid Greek turmoil
Unfairness to homeowners blocks recovery
Does Andrew Ross Sorkin annoy you, too?
Your retirement health-care tab will run $240,000
Does Andrew Ross Sorkin annoy you, too?
S&P 500 losses wipe out earnings-related gains
Unfairness to homeowners blocks recovery
How to get a piece of Facebook
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD... Expand
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD became a service of MarketWatch in April 2002. In addition to being a Senior Columnist for MarketWatch, Hulbert writes a monthly column for Barron's.com and a column on investment strategies for the Journal of the American Association of Individual Investors. A frequent guest on television and radio shows, you may have seen Hulbert on CNBC, Wall Street Week, or ABC's World News This Morning. Most recently, Dow Jones and MarketWatch launched a new weekly newsletter based on Hulbert's research, entitled Hulbert on Markets: What's Working Now. Collapse
Media Web
Does Andrew Ross Sorkin annoy you, too?
S&P 500 losses wipe out earnings gains
London Eye
Shareholders' revolt will shift markets
The Economist's Corner
What, me worry about inflation?
On Canada
For China, Canada is about more than oil
Read Full Article »