Investors’ excess exuberance over stocks indicates they’re unlikely to continue the rally that has taken the market almost to four-year highs, says investment guru Mark Hulbert, founder of The Hulbert Financial Digest.
Several sentiment indicators have “suggested that the rally is living on borrowed time” for weeks, he writes on MarketWatch.com.
For example, the average recommended stock market exposure among short-term market timers tracked by Hulbert hit 53.1 percent Tuesday. That compares with 42.1 percent on May 1, when stocks set a four-year high.
Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.
“This 11-percentage-point difference is one measure of how much more optimism there is today than at the May market peak,” Hulbert says.
The difference is even sharper for Nasdaq market timers — 58.8 percent now, twice the early May total.
“These sentiment comparisons show that the stock market’s May-June correction failed to do what corrections are supposed to do — wring some optimism out of the market, [which would have given] it better odds of rallying to a new high …,” Hulbert writes.
So it’s no wonder that market has been unable to break through its May peaks.
Ideally, the May-June correction would have put the market in better position to ultimately hit record highs, Hulbert writes.
“Unfortunately, it is not.”
Many investors seem to share Hulbert’s view, as indicated by the recent outflow of money from stock mutual funds.
"This is the most disrespected rally I've ever seen," John Buckingham, chief investment officer at Al Frank Asset Management, tells The Wall Street Journal.
Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.
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