Contrarian Warning – One Sentiment Measure Is At 1987 Levels Of Bullishness

Longtime option and sentiment trader Don Fishback passed these charts on to us — what they show is various long-term investor/advisor sentiment surveys from Investor’s Intelligence, AAII, Hulbert and Consensus.  The combined Bullish Sentiment by his measure is at the highest level since August 1987 (the market dropped 22% on ‘Black Monday’ in October 1987)  — see the charts below:

editors note:  There are 11 charts attached, interesting for contrarians.  Thank you Moby and Don Fishback!

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(all via Don Fishback ODDS, http://www.donfishback.com)

The “All Average” chart at the bottom shows the highest overall level of bullishness since 1987 by this combined measure — an ‘upside breakout of bullish sentiment’, if you will (in which a lack of bears is a factor, and could contribute to a potentially dangerous complacency).

Does this mean that the market is due for imminent crash?  Of course not — but it is something to keep in mind given the 20%+ gains seen in the market in 2012 and 2013 without much in the way of 10%+ pullbacks.

You will note that high levels of bullish sentiment were hit many times in the past without being a pre-cursor to a major broad market correction or crash — many examples on that last chart above — but it wasn’t quite this high level of overall sentiment.