The latter especially, has been a reliable contrary indicator. Basically, the Small Specs have never been right at important market turns. For instance, they were heavily net short in the late 1990’s but by the time the market topped in 2000, they had covered and become net long. They have reliably been a contrary indicator all along the current bull market as well, going net short at each correction bottom, post 2009.
Add to this the Newsletter writer community, which has a vested interest in trend following and always looking right with the market. The latest Investors Intelligence data by way of Pension Partners and the Daily Shot email service shows that NL writers have quickly gotten right with the bear, and the fear.
Another indicator is the NAAIM Investment Managers data. These managers sell down toward 70% to 100% cash at every market bottom. They are now at around 75% cash.
Of course, market sentiment is market sentiment, economic fundamentals are economic fundamentals, monetary policy is monetary policy and global pressures are what they are.
In other words, sentiment is a condition, not the be-all, end-all director in any short-term period. Just as the market floated for years with over bullish Investors Intelligence data for instance, the over bearish data now in play is a condition to future bullish events, but not necessarily a fine timing tool.