Sentiment, Checklist Favor Bulls

We noted on April 25 that roughly 60% of the “we would like to see” boxes had been checked relative to increasing the odds of a sustainable turn in the markets. Today’s trade thus far has added quite a bit of green to the table below. The table is based on the S&P 500 Index’s daily chart. We can’t emphasize enough the use of the term “odds” related to the table below. Green guarantees nothing but it does decrease the odds of significantly lower lows in the days ahead.

As most readers know, investor sentiment can be a contrarian indicator, especially when it reaches extremes. The blurb below from the Wall Street Journal is good news if you are long stocks:

Bullish sentiment among individual investors fell 3.5 percentage points to 27.6%, according to the latest survey from the American Association of Individual Investors. This indicator — which measures investor expectations that stock prices will rise over the next six months — is at its lowest level since the end of September, just before stocks bottomed from the summer meltdown. This is the fourth straight week bullish sentiment has dropped below its historical average of 39%, AAII says.