In the US there’s a weekly poll of stock newsletter writers called the Investors Intelligence survey. This has a great track record as a gauge of investor sentiment. The latest reading shows the lowest level of gloom since the market peaked in October 2007, coupled with the highest level of optimism since January 2008 – just before markets plunged. What’s more, says the FT, another survey of individual investors’ optimism is near its highest point in over a year.
These are classic signals to contrarians like us that prices are about to crack. As David Rosenberg of Glusken Sheff puts it: “it’s highly unlikely that 90% of the economic community can be right on the same thing at the same time”.
These are yet more signs that most investors are gambling on the market rising. And that creates the contrarian’s second sign of a market top.
And... the Ned Davis Research's NDR Crowd Sentiment Poll recently jumped just into the extreme optimism zone (which is generally bearish for the market).