Investor Sentiment Update

Today was a pleasant surprise for the bulls. I was hoping that the market didn't give back too much of yesterday's gains, but I would much prefer to build on it.

The Nazz led the way all day, and finished up more that +1.2%, vs. a +0.34% gain for the S&P 500. Growth stocks were strong, including tech, semis, and biotech. Energy and materials stocks led the way for the broader market, while bank stocks and homebuilders lagged.

The Nasdaq has now broken above its overhead 50-day resistance, a nice technical accomplishment. But both its 50-day and 200-day moving averages are still trending downward, which means there remains plenty of resistance at higher levels.

A few stocks on my screen had an outstanding day, with all of them up more than +10% for the trading session. They were: Foster Wheeler (FWLT), Freeport McMoran (FCX), and Tesoro (TSO). Not bad, even though these stocks have been terribly depressed recently.

As for investor sentiment, the Investor's Intelligence survey came out today, and for the 8th consecutive week bears outnumbered bulls. That is a very long streak historically. Moreover, last week while I was out, bears in the survey totalled 50%. According to Merrill Lynch, that is the highest reading since late 1994.

I find this astonishing. That means that there were more bears last week among institutional investors than at any time during LTCM in 1998, after 9/11, and the bear market bottom in October 2002. And who says there is no negativity bubble?

The AAII survey of individual investors has registered more bears than bulls for 9 of the last 10 week, also a lengthy streak.

The put/call ratios are less bearish, and have faded since reaching their recent highs in mid-July. They are not yet back to levels that signal too much confidence, and thus the need to hedge or raise cash. Right now they are merely back in neutral territory, but I will continue to monitor them.