Ryan Detrick: Sorry, Sentiment Still Sucks (which is bullish)

My friend Ryan Detrick (a Chartered Market Technician) does some amazing work at Schaeffer’s Investment Research and this week was no exception.

Personally, I think that sentiment is much better than what the polls would have you believe (as evidenced by the way the market has been acting). Detrick says no, it still has a long way to go before the public accepts the rally and euphoria begins (which would be a sell signal).

As an aside, everything you need to know about investor sentiment cycles over at Barry’s site in one anthology.

Ryan makes the case with eleven somewhat anecdotal bullet points for why we’re not quite through the sentiment cycle just yet…

From Schaeffer’s Investment Research:

1. Even in the face of a higher market, analysts are becoming more bearish. Turning to the S&P 500 Index (SPX), the percentage of “buys” among its components has steadily dropped since the lows late last year. In fact, the last time the “buys” were this low was April 9, 2010, when the SPX was beneath 1,200! This skepticism in the face of increasing prices bodes well for a continuation of the rally.

SPX Stocks and Percent Buy Ratings


2. The Yale School of Management Crash Confidence Index is near 30%, about half of where it was near the market peak in 2007. This survey shows the collective confidence that there will not be a crash over the next six months. In other words, with similar prices now, the perception there will be a crash over the next six months is much higher.

3. A recent Franklin Templeton survey of 1,000 investors showed a massive disconnect from reality and perception of market performance. This hammers home just how many people have totally missed this rally.

    • 66% thought SPX was down in 2009


    • 48% thought SPX was down in 2010


    • 53% thought SPX was down last year


4. CNBC and other market-related channels have had very poor ratings — yet another sign of how this bull market isn’t getting as much attention as you’d expect. Below is the latest data I could find, from last quarter.

    • Squawk Box (6 – 9 a.m. ET) is supposed to prime traders before the bell. The show posted its lowest-rated time block since the fourth quarter of 2006.


    • The Closing Bell (3 – 5 p.m. ET) is supposed to wrap up the day’s action. The slot posted its fifth-lowest ratings in total viewers and second-lowest ratings in the key 25-54 demographic since 1997.


    • Fast Money (5 – 6 p.m. ET) is focused almost specifically on swing-trading stocks. That time slot showed the lowest rating for the 25-54 demo since 1997 — and lowest in total viewers since Fast Money launched in 2006.


5. SmartMoney magazine last month terminated its print edition and moved totally to an online service. Could be a sign of the times, or yet another sign investors aren’t interested in this bull market.

Read the other six below:

Schaeffer’s Investment Research


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