Where Have All the Market Bears Gone?

Sign in

Become a MarketWatch member today

Mark Hulbert

April 13, 2011, 12:01 a.m. EDT

View all Mark Hulbert "º

"¹ Previous Column

History bodes ill for stock market

First Take "º

Goldman's bearish call on crude

By Mark Hulbert, MarketWatch

CHAPEL HILL, N.C. (MarketWatch) "” Wall of worry? That was so "last week."

Recent sessions have witnessed such a mad rush to jump on the bullish bandwagon that the wall of worry is in danger of crumbling.

/quotes/comstock/10w!i:dji/delayed DJIA 12,263.58, -117.53, -0.95%

Consider the average recommended equity exposure among a subset of the shortest-term stock market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). When I last devoted a column to stock market sentiment, in late March, this average stood at 15.8%. ( Read my Mar. 22 column. )

By earlier this week, in contrast, the HSNSI had risen to 58.8%, or 43 percentage points higher. That represents a rapid increase in bullish sentiment in a very short time.

This increase has been even more evident among market timers who focus on just the Nasdaq market "” an arena that is particularly sensitive to changes in the way the wind blows. The Hulbert Nasdaq Newsletter Sentiment Index, or HNNSI, stood at minus 41.7% on the date of my late March column about stock market sentiment.

By earlier this week, the HNNSI had risen to plus 46.7%, representing a nearly 90-percentage-point increase in just a couple weeks' time.

Such rushes to jump on the bullish bandwagon are an ominous sign, according to contrarian analysis. It suggests, at a minimum, that the bulls need to pull back somewhat before the rally can continue.

The most likely vehicle for such a retreat of the bulls would be a market correction "” a decline that appears to have begun on Tuesday, when the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 12,263.58, -117.53, -0.95%)   dropped 118 points. Especially if this decline lasts for longer than just a day or two, it will be crucial to see how the bulls respond.

If they stubbornly hold on to their new-found bullishness, or only begrudgingly reduce their equity exposure, contrarians would bet that an even deeper decline is necessary in order to re-establish a strong wall of worry.

The most bullish scenario, from a contrarian point of view, would be for the newly minted bulls to as quickly jump off the bullish bandwagon as they recently have jumped on it. That would suggest that the wall of worry from March has not permanently crumbled "” but merely gone into hiding.

We'll know soon enough.

Response to recent emails

On a different topic: A number of you have emailed me in recent days to complain about the mixed messages that my columns seem to be sending. Some are reporting analyses that conclude we're in a long-term bull market, while others "” such as mine from earlier this week "” point out that, at least by some measures, stock valuations are at dangerously high levels. ( Read my April 12 column. )

But I don't see my role as only reporting one side of the story. If I did that, I would be withholding arguments and data from you that you deserve to see.

One of the main lessons I've learned in my 30 years of tracking investment advisers is that there are many roads to riches. Among the strategies that beat the market over the long term, there never has been "” and never will be "” unanimity about how the markets will behave at each step along the way.

I would be biasing my commentary if I were to report only those roads to riches that always agree with each other. Regardless of how journalistically pleasing it would be for me to do that, it would actually be doing you a disservice.

/quotes/comstock/10w!i:dji/delayed Dow Jones Industrial Average (DJIA) /marketstate/country/US The market is open4:38:13 am The market is closed4:38:13 am 12,263.58 Change -117.53 -0.95% Volume 137.26m Real time quotes var embeddedchart70394702Chart = new EmbeddedChart('#embeddedchart70394702', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'US:DJIA'); jQuery.data($('#embeddedchart70394702').get(0), 'embeddedchart', embeddedchart70394702Chart); Add to portfolio DJIA Find a Broker Create alert //$(document).ready(function() { var storywidth = $('#mainstory').width(); var maxwidth = storywidth; $('#maincontent pre').each(function (index, value) { var thiswidth = $(value).width(); if (thiswidth > maxwidth) maxwidth = thiswidth; }); var offset = maxwidth - storywidth; if (offset > 0) { var margin = 13; var blanketwidth = $('#blanket').width(); var contentwidth = $('#maincontent').width(); $('#blanket').width(blanketwidth + offset + margin); $('#maincontent').width(contentwidth + offset + margin); $('#mainstory').width(storywidth + offset + margin); } //});

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.

Add Comment › · Recommend · Post: Alert Email Print More Mark Hulbert April 12, 2011 History bodes ill for stock market April 8, 2011 Looking forward to Tax Day April 7, 2011 Bull market is alive and well April 5, 2011 A bullish six-month forecast April 4, 2011 In search of higher yields Explore related topics Dow Jones Industrial Average Comments Screener About Mark Hulbert

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.

First Take Goldman's bearish call on crude

A Goldman Sachs research note looks at why stoking a speculative rally in oil prices is harder today than it was three years ago.

3:23 p.m. April 12, 2011

Most Popular Most read Most commented Federal Reserve's path of destruction China headed toward stagflation, instability History bodes ill for stock market The safest bonds in the world Where have all the bears gone? The best laid plans ... What got cut in the U.S. budget deal U.S. stocks fall on revised growth forecasts Oil settles 3.3% lower on demand fears U.S. trade activity softens in February Find a Broker Partner Center » MktwHulbert's Latest Tweets

"Mark Hulbert: Where have all the bears gone? http://on.mktw.net/g8PdS4" 11:04 p.m. EDT, April 12, 2011 from MktwHulbert

"Mark Hulbert: History bodes ill for stock market http://on.mktw.net/fOQBOz" 11:45 p.m. EDT, April 11, 2011 from MktwHulbert

"Mark Hulbert: Looking forward to Tax Day http://on.mktw.net/eMO3cg" 11:06 p.m. EDT, April 7, 2011 from MktwHulbert

"Mark Hulbert: Bull market is alive and well http://on.mktw.net/gRdLgo" 5:00 p.m. EDT, April 7, 2011 from MktwHulbert

"Mark Hulbert: A big change of heart http://on.mktw.net/enWwjn" 11:28 p.m. EDT, April 6, 2011 from MktwHulbert

Featured Commentary » Next: Chuck Jaffe

Chuck Jaffe

Mutual Funds

Five financial records you can trash now

Next: Rex Nutting

Rex Nutting

Money and Power

We're worrying about the wrong deficit

Next: Jon Friedman's Media Web

Jon Friedman

Media Web

IPad and old media: a shotgun wedding

Next: Robert Powell's Your Portfolio

Robert Powell

Your Portfolio

No room for error in earnings season

Next: Brett Arends' ROI

Brett Arends

What Wall Street Won't Tell You

The safest bonds in the world

Next: Mark Hulbert

Mark Hulbert

On the Markets

Where have all the bears gone?

Next: Amy Hoak's Home Economics

Amy Hoak

Home Economics

No bloom for spring real estate

Next: John Prestbo's Indexed Investor

John Prestbo

Indexed Investor

Commodities indexes keep rolling along

Next: David Weidner's Writing on the Wall

David Weidner

Writing on the Wall

Bailouts for banks, free markets for us

Next: Paul B. Farrell

Paul B. Farrell

Behavioral Economics

Lazy Portfolio winners battle 11 newcomers

Next: Michael Ashbaugh's The Technical Indicator

Michael Ashbaugh

The Technical Indicator

S&P 500 drops to major technical test

Next: Lisa Twaronite's This Week in Japan

Lisa Twaronite

This Week in Japan

Beware of Japan's Chernobyl-level rank

More BigCharts Virtual Stock Exchange WSJ Asia WSJ Europe WSJ Americas WSJ Chinese Financial News Online SEARCH 4:38 AM EDT April 13, 2011 /marketstate/country/us New York Closed /marketstate/country/uk London Open /marketstate/country/jp Tokyo Closed /marketstate/country/us   /marketstate/country/uk   /marketstate/country/jp   View All Latest News /news/latest 8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998574:31a

U.K. March jobless claims rise by 700

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998564:31a

Updates, advisories and surprises

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998544:07a

Daimler expects significant profit growth

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998534:05a

ASML sees record year, negligible Japan impact

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998523:47a

European stocks rise, led by Alcatel-Lucent

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998513:35a

Thomas Cook downgraded two notches at Goldman

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998503:13a

Schneider Electric says not in talks with Tyco

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998483:11a

Europe stocks open up, led by Alcatel; ASML off

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998473:04a

Alcatel-Lucent up 3.2% after broker upgrade

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998463:03a

German DAX 30 index up 0.4% at 7,132.50

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998453:02a

ASML down 1.7% after Q1 results

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998443:01a

Atkins up 4.4$ after trading update

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998433:01a

French CAC 40 index up 0.5% at 3,996.60

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998413:00a

U.K. FTSE 100 index up 0.5% at 5,993.39

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998403:00a

Stoxx Europe 600 index up 0.2% at 276.68

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998382:47a

WS Atkins to beat earnings expectations

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998372:38a

Gold futures stage partial rebound

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998362:33a

Fresnillo gold production up 13%

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998352:32a

Nokia downgraded, Alcatel lifted at Morgan Stanley

8c077dc4-5ad2-4f73-b9c3-a381c5fece05:2998342:26a

Foxconn to invest $12 bln in Brazil ops: report

Loading more headlines... dow /quotes/comstock/10w!i:dji/delayed 12,263.58 -117.53 -0.95% nasdaq /quotes/comstock/10y!i:comp 2,744.79 -26.72 -0.96% s&p 500 /quotes/comstock/21z!i1:in\x 1,314.16 -10.30 -0.78% Kiosk 1300190400000 1301490000000

Commentary

LISA TWARONITE'S THIS WEEK IN JAPAN Not your father's Chernobyl There are some good reasons to sell Japanese stocks right now, but seeing the word "?Chernobyl' in a headline isn't one of them. 140069 1240948800000 1240948800000

Berkshire Hathaway

What Sokol knew Ex-Buffett lieutenant David Sokol (right) knew of moves toward a Berkshire bid for Lubrizol before he bought stock in the company, according to a new filing. 140054 1240948800000 1272484800000

Commentary

MICHAEL ASHBAUGH S&P 500's crossroads With this week's stock-market downturn, the Standard & Poor's 500 Index has dropped to a major technical test. /conga/kiosk/commentary.html 139972 1256090400000 1256090400000

Consumers

Drive smart, save money Prices at the gas pump are rising at an alarmingly fast pace, but if you drive carefully, you can dramatically improve gas mileage. "¢ Gas prices expected to rise 40% this summer /conga/kiosk/consumer.html 139956 1266260400000 1266260400000

Commentary

IRWIN KELLNER Budget: Harder than it looks Advocates of deficit reduction are all in favor of tightening belts "” as long as it's someone else's. "¢ Plus: April Trading Strategies 139968 1248033600000 1248061500000

Technology

Chip aftershocks afar Repercussions from Japan's disaster will be felt in European technology long after the initial jolt's waves have faded. 139964 1255312800000 1255312800000

Fantasy Earnings Trader

Read Full Article »