Sentiment hits extremes

Sentiment measures have hit extremes last seen at the major February top (and April 29).

Excess Optimism

As measured by, the level of “Excess Optimism” among all it’s sentiment indicators is now at 40% after hitting 41% last Wednesday. The last time the level hit 40% was last February 19th, the day the S&P 500 topped, ending the bull wave from March 2009.

Dumb Money Confidence

SentimentTrader’s “Dumb Money Confidence” measure of small investors hit 76% last Friday. The last time it was near this extreme, was when it hit 74%, last February 19th when the S&P 500 topped.


S&P 500 volume hit 6.18 million shares last Friday. The last time volume was at such an extreme was when the S&P 500 hit a wave top on April 29, 5.88 million shares traded.


The “TRIN” aka Arms index hit 0.59 last Friday (weekly average hit 1.07), signaling a market that is close to being overbought (generally 0.50 or below signals an overbought market).

These sentiment measures on high relative volume and characterized by the TRIN as overbought are all signs that stocks may be at a major juncture. Given how disconnected prices have become from economic fundamentals tells us that investors are following day to day narratives. Friday’s “shocking” headline numbers in the jobs report sent stocks soaring. Each day of optimistic headline news that signals “back to normal” conditions means stocks can easily hit further extremes.

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