Weekly Sentiment Review

So the market put in a very solid accumulation day Thursday, and gave little back on Friday. This might help improve sentiment in the coming week, but for now, the indicators are still in highly negative territory.

Here is a sample of some of the current levels of investor sentiment:

• The bull/bear spread in the Investor's Intelligence survey barely budged at +1 (37% bulls, 36%% bears); this is still one of the most bearish spreads in 3 years
• The spread in the AAII survey remained in negative territory (-1) for the 7th consecutive week; this is an amazing stretch of more bears than bulls
• The Rydex Ursa/Nova ratio is still near record lows at 0.09
• The Public Short ratio is still near record highs at 62%
• The ISE Sentiment Index hit a new low this week (65)

The amount of money that has flowed into market-neutral strategies, low correlation assets, hedge funds, etc. is off the charts. I also continue to hear strategists trotted out on CNBC talking about how we are either still in a bear market, or entering a new bear market.

My colleague Gary Smith and I talk about the potential for "the mother of all short-covering rallies". It makes a lot of sense, as you seem to have a number things lining up for it. Certainly very few investors are positioned for such an event. And even though it would take a long time to develop and play out, it would be the perfect move by the market to catch the majority of participants leaning the wrong way.
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