Weekly Sentiment Review

Most of the anecdotal indicators I follow, namely the investor surveys, have turned highly bullish. That's a negative development for the contrarian investor, since we like to invest when everyone else is bearish on the market. If everyone is already positive, then it usually means the current rally is getting long in the tooth.

Alternatively, some of the other market indicators I follow, such as short interest figures as well as put/call ratios, are still in neutral territory. That means that these folks, who are betting with real dollars, are still somewhat skeptical and likely still have a healthy dose of bearish bets on their position sheets.

Here is a sample of where some of the indicators stand:

• The bull/bear spread in the Investor's Intelligence survey rose to +34 (54% bulls, 20% bears)
• The bull/bear spread in the AAII survey rose to +28 (47% bulls, 18% bears)
• The bulls on Market Vane are at an 8-month high (70%)
• The Specialist Short ratio is still very low at 0.19
• The Public Short ratio is still high at 0.51 (the "public", including hedge funds, are still doing a lot of shorting)

So, overall I would have to say that my sentiment ranking for the market is neutral. But it is closer to turning bearish since I agree that it is getting late into this rally. I am not taking all of my chips off of the table yet, but would consider lightening up into further strength.

The easy money was made back in late April/early May, when bearish sentiment was at an extreme. I think we need to see some weakness in the market over the next several weeks before looking for another tradable rally.