Major Warning Signal For Markets
October 31, 2013
There is reason to be concerned even with global stock markets on a tear recently. There is an incredibly important chart featured below which shows why the stock market may finally be set to plunge.
If you look at the chart below it reveals there are some serious warning signals even as many major indexes have been hitting new highs.
Here is the latest Investors Intelligence report along with the all-important sentiment chart: “Indexes gained more ground last week although their charts held steady at record levels achieved last Tuesday, 22-October. Many indicators also moved further into overbought territory that session and then remain at those prior top levels through Monday of this week. Q3 earnings are overall beating lowered forecasts although revenue growth remains on the light side. There was also further optimism amongst the newsletter editors with bullish levels moving to the low end of danger territory.
After gaining more than 10% in just two weeks the bulls were 52.6%. That is up from 49.5% a week ago and above the early August high at 51.6%. The current reading is up from 37.1% early September that provided the skepticism that allowed for new buying. Now the bulls are approaching their 2013 peak of 55.2%, shown with the May high. That suggests portfolios are near fully invested with few alternatives to stocks to grow capital. The excess optimism points to increased risk.