Investors Are Even More Euphoric And Confident.

As noted on the blog last Thursday, even though the market had been down for three straight weeks, last week's poll of its members by the American Association of Individual Investors (AAII) showed the bullish percentage had increased to 42.7%, with those bearish at only 33.7%.

After the market's four straight up days, this week's poll, released last night, showed another big jump.

Bullish percentage: +7 to 49.7%

Bearish percentage : –11.2 to 22.5%

Those are numbers usually associated with close to market tops, not correction lows, and from the looks of the pre-open indicators, investors will be piling into the market even more feverishly this morning, which will spike bullishness, and plunge bearishness even further.

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By the time corrections are over, fear has usually taken over, with bulls under 20% and bears above 50%, just about opposite to current readings.

For instance, in early September, just before the market peak in mid-September bulls had climbed to 51.9%, bears had dropped to 19.2%, just in time for the top.

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But sentiment does not provide signals, it only indicates risk. It can get more lop-sided, but at current levels it is a reason for concern.

Market still short-term oversold.

Meanwhile, the market is still short-term oversold beneath 50-day moving averages. But that could change today if the big rally likely at the open holds through the day.

 

Volatility since mid-September. 

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To update the day-to-day listing we began on Saturday's blog:

There have now been 18 triple-digit moves by the Dow in the last 24 trading days on a closing basis. That does not include the days with intraday triple-digit swings from the lows to the highs, or highs to lows, which were just as wild even on the days when the closes were not triple-digits.

Of the triple-digit closes, 7 were to the upside, 11 were to the downside.

Here's how the closes went since September 18 when the volatility began, to today's 153 points to the downside:     +109; +13; –107; –116; +154; –274; –264; +167; –238; –3; +208;  –17; –272; +274; –334; –115; –223; –5; –173; –24; +263; +19; +215; -153.