Where did all the bulls go?

US Market Timing
Advisors Sentiment

Overview

Advisors continue to reflect a level of pessimism that was last shown more than thirteen-years ago.

The bulls edged higher to 27.8% from 27.4% on the last report, their lowest reading since July 1994 when the bulls were 23.3%. The bears advanced to 48.9%, up 1.6% from a week ago. They are now at the highest level since January 1995 when we counted 50.9%.

1994 and early-1995 was a period that included lots of advisory pessimism. The bears outnumbered the bulls for 46 consecutive weeks from April 8, 1994 to February 17, 1995. February 1995 ended with the first ever close above 4,000 for the Dow Jones Industrials and from then on, off it went to the races for the remainder of that decade.

Record oil prices and crashing financial stocks continue to fuel the bearish fire. The Fannie Mae and Freddie Mac disasters last week maintained a high level of fear amongst the advisors who may have been hoping for some bargain buying. Many advisors are trend followers and don’t want to recommend stocks in a falling market, so it could take a significant reversal before the shift to accumulation mode.

Advisors have made a quick shift from their May outlook, when indexes were all in positive territory for 2008. That month saw the bulls at 44.8% and the bears at 29.9%. As a contrast, at the prior March 2008 lows the bulls were 30.9% and bears were 44.7% and when those figures began to shift we noted that as a buying opportunity. Both those March levels have now been exceeded in a positive manner. The current readings remain bullish. The current plethora of bad news is typical of a market bottom, when it often seems it just can’t get any worse, it then does.

Our short term indicators tuned negative with the sentiment at the May top. They have traded at oversold levels for the last few weeks and we are waiting for confirming reversals up and new bullish formations. Last week had the third highest number of selling climaxes (350) for this year. We only noted more at the March (577) and January (1,385) bottoms. Expect many more selling climaxes this week.

Advisors classified as correction are looking for a near term drop in stocks, but see it as a potential buying opportunity. Their number fell to 23.3%, from 25.3%, as the sell-off turned them bearish.

The difference between the bulls and bears is -21.1%, compared to -19.9% a week ago. Those are even stronger levels then March 14 when the spread was a ‘negative’ difference of -13.8%. The opposite signal occurred in October 2007 when the spread was very bearish at +42.4%. We now need to see the chart turn up.

Sentiment Charts