These two charts caught my eye as they indicate that investor sentiment is pretty negative right now, which is good. That is, stock market rallies tend to climb a ‘wall of worry’ rather than a wave of optimism. Once things get to the point where most investors are positive and pumped up, well all the buyers are in and stocks often turn south. Now, bearish sentiment is pretty high and that bodes well for stocks later this year.
The first chart from Bespoke shows the percentage of investment newsletters than our bullish now and it is fairly low, not as low as we saw in March of 2009, but still pretty low:
Source: Bespoke Investment Group
The next chart shows the numbers of stocks that are deemed oversold or under high selling pressure versus those that are overbought:
Source: Bespoke Investment Group
Overbought stocks are those well above their 50-day moving average (DMA) and oversold stocks are those that are well below their DMA.
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Kurt Brouwer is a fee-only financial advisor with three decades of experience. He is the chairman and co-founder of Brouwer & Janachowski, LLC. Kurt has written books, articles and hundreds of blog posts on mutual funds, ETFs and other investment topics. E-mail: kurt.brouwer *at* gmail.com.
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