Good news for stock market bulls this week: The American Association of Individual Investors sentiment survey shows a reduction in bullishness—to 39% from the recent high mark of 55%. Bearishness however has only risen from 18% to a still-low 21%. Which means the move in sentiment has been primarily from bullish to neutral.
I suggested the other day that the, albeit very slight, downward volatility in early January might bring sentiment down a bit. The fact that it has tells me that folks remain jittery, and that’s a beautiful thing if you hope for a continued rise in the market.
I believe John Templeton had it right:
Bull markets are born on skepticism, grow on pessimism, mature on optimism and die on euphoria.
He also said, and this one’s irrefutable:
There will always be bull markets followed by bear markets followed by bull markets.
Which means, next up is a bear market. The question is, are you feeling euphoric?