To a casual observer the stock market seems almost giddy with joy. Ben Bernanke and the Fed stand ready to come in if there is trouble. President Bush is going to help sub prime borrowers which will, in turn, help ease the credit crunch. The stock market responds with a sharp rally on Friday.
But the reality is that there is a lot of fear and worry in market land. Chart 1 shows one manifestation of concern. This is the percentage of bears among market advisors and newsletter writers as reported by Investor's Intelligence. Historically whenever the percentage of bearish advisors moves above 35, it's time to start looking to buy. The percentage did get into the 40's during the 2000-2002 bear market, but during bull markets the current reading is an extreme.
It's such a reliable law. Investors get scared at bottoms and optimistic at tops, so based on this indicator, we are flirting with a bottom.
[via scalenet]
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