Higher Prices and Less Bulls are a Great Combination

As S&Ps continue to rock on, less participants are believing. It really is amazing to watch the lack of bulls as prices keep marching forward. This is fascinating stuff....

My friend Ari Wald over at the PriceRidge group has a great note out this morning pointing to the most recent sentiment data:

"Investors Intelligence (II) reported 42.6% bullishness to 26.2% bearishness in its weekly survey of advisors yesterday.  This brings the II Bull/Bear ratio to 1.6, the lowest reading since August and modestly removed from its 2.2 September peak.  This is a somewhat neutral condition but the recent ebbing of bulls should nonetheless be viewed as a bullish signal from a contrarian perspective, potentially allowing markets to once again move higher following a pause to refresh."

Ari Wald, a Chartered Market Technician, attributes this change in sentiment to a sharp shift in bullish advisors, which dropped to just 42% from 54% in September. He explains that, "Since 2009, II Bull/Bear readings between 2.5 and 3.0 have marked frothy investor behavior, and readings between 1.0 and 1.5 have coincided with tactical buying points."

This is the kind of action we want to see in a bull market. Stocks continue to climb the proverbial wall of worry and as long as pessimism reigns, we should expect higher and higher prices.

Source:

Receding Optimism is Bullish - 10.18.12 (The PrinceRidge Group)