Investors Intelligence - Important Bull/Bear Chart Watch Out!

This is an extremely important chart from Investors Intelligence showing 10 years of up to date Bull/Bear surveys. From their report, “The Investors Intelligence Advisors Sentiment Survey bull-bear spread is once again moving towards the +40% danger zone. When the spread last broke above 40%, in October 2007, the market collapsed spectacularly.” The entire write-up is below.

From Investors Intelligence:

In last month's report we were cautious and anticipating a correction. Subsequent trading in November saw the markets perform the much needed correction, a move that retraced a Fibonacci 23.6% retracement of the September and October rally on both the S&P 500 and the NASDAQ 100. Not that deep but it was sufficient enough to take the boil off our indicators. We piled back into equities over the last two weeks of November, just ahead of the market reasserting. The Coe Report portfolio for instance moved rapidly from net short mid month to a 110% net long last week.

However, 2010 has been all about switching between risk-on and risk-off and that looks set to continue going into 2011. The technicals are now implying a shift back to the latter. Two key reasons for caution are highlighted in this report. Of course, over the short-term, seasonality now favors the upside. The final five trading days of the year historically generate a Santa's rally, so the hangover, as it often does, may not rear its ugly head until January. (more)