Investor Sentiment

As hard as it is to believe, last week's "fat pitch" is this week's "sweet spot".

Investor sentiment has turned bearish here, and this is our "fat pitch".

This is my wish list and it would be better if....

After 10 weeks of being "all in", the bulls have retreated leaving investor sentiment with a neutral reading this week. This seems kind of odd as you would think that lower prices would be welcomed by those of bullish persuasion. Oh well! The "sure thing" has turned out not to be a "sure thing", and those who waited for the all clear are either back on the sidelines or have positions underwater.

After 8 months of indifference to the constant and persistent rise in stock prices, the "smart money" has finally turned bearish. It is time to pay attention.

While the significance of Friday's high volume reversal has yet to be determined, the set up has the making of a market top - the majority of investors are poorly positioned and the precipitating event (i.e., the government's charges against Goldman Sachs) was not foreseen.

This past week the S&P500 made a marginal new high at 1159. Since the last marginal new high 9 weeks ago, the S&P500 has made 1.2% and along the way it had a 7% draw down. In my opinion, that's the path to the poor house - not the end of the rainbow.

With 3 out of 4 of our measures registering extreme readings, few words are needed to describe investor sentiment this week.

If insider expectations continue to remain low, then why should yours remain high?

The investor sentiment data is consistent with a market that is in bounce mode.

Finally, the "Dumb Money" indicator has turned neutral after spending 28 consecutive weeks in the extreme bullish zone.

Nothing has changed from last week, last month, or even 4 months ago when the market was higher than it is now!!

I must admit that I am surprised by the sentiment picture this week. I thought the indicators would reflect a less bullish posture amongst investors.

Make no mistake about it, investors remain poorly positioned to weather a sell off.

Complacency reigns as they don't ring a bell at the top.