The key thing contrarians will be focusing on in coming sessions: How sentiment reacts to any weakness that does develop. Almost by definition at such times, therefore, the unexpected will be bad news. The stock market often encounters air pockets when sentiment is this high, for the simple reason that, at such times, the market’s level already reflects the expectation that most of what will be coming down the pike is good news.
Today, this NASDAQ-centric average stands at 73.3%, in contrast to 72.9% on the day of the stock market’s late-April high. This average is a good barometer of sentiment because the NASDAQ market is particularly sensitive to mood changes among retail investors.
The slight difference between these two readings offers very little hope to contrarians.Įven more ominously, consider the average recommended exposure among just those market timers who focus on the NASDAQ market. Today, in contrast, the HSNSI stands at 58.2%. Hit its pre-correction high, this average stood at 65.5%. On the day late last April when the Dow Jones Industrial Average Consider the average recommended stock market exposure among a subset of short-term market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI).
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