Doug Kass and the Negativity Bubble

Today on RealMoney.com, Doug Kass posted that the negativity bubble has burst, and thus a correction is at hand. He cited the Investor's Intelligence numbers as one aspect.

Here was my response:

As a resident proponent of the 'negativity bubble', I feel compelled to respond to Doug's earlier post. I would expect Doug to say it has burst at the first signs of bearishness lifting, but he is looking at a very short time frame.

The bull/bear spread in the II survey is up to +16, which may be the highest level since January, but it is still far, far below October's levels of +42. Ditto for the Market Vane bulls, which are back to 55%, but still well off last October's level of 69%.

I could also make the same argument for the put/call ratios. They are not as bearish as they were in March, but still not close to levels associated with outright bullishness. But beyond that, let's look at the big picture:

There is a record $1.2 trillion in retail money market accounts, an all-time record. That money mountain is so scared to move off the sidelines, that it is willing to accept paltry 2% returns just to remain safe. There also remains record levels of short interest on the NYSE; record inflows into absolute return/low-correlation type strategies; and consumer sentiment is at multi-decade lows.

And what about the bears' prediction of a nasty recession? With each datapoint, it seems the odds of an official recession continue to drop. So I will concede that sentiment has moved more towards the 'neutral' camp, and that a pullback would be a normal result of this. But don't expect the negativity bubble to burst until stocks move meaningfully higer and drag money in off the sidelines, kicking and screaming.