I won't have the exact numbers until this afternoon, but I understand that the Investors Intelligence numbers are showing that the percentage of bulls have increased and the percentage of bears have decreased. The spread of bulls over bears was already too high. Too many bulls vs. bears hasn't had a negative effect on the market yet, but if it continues, it eventually will.

Larry

Larry

From What you wrote, investors intelligence sounds
a tool of predictive value. Where is the website?
Are there any other similar tools?

Jay

Jay,

Investors Intelligence is one of the most widely followed sentiment indicators. It is produced by chartcraft.com. I don't subscribe to it myself because I can always get the numbers from one of the other services that I subscribe to. And I don't want to make that big of a deal of it because you certainly don't want to make investment decisions solely on a sentiment indicator. But I watch it and when the numbers get to be extreme, it certainly gets my attention. As a result, I may write a few more calls or put on a few more calendar spreads than I normally would.

The only free site that I know of (although I'm sure there are others) that publishes the numbers on a regular basis - usually a day after the fact - is The VTO Report.

Today's Investors Intelligence report showed an increase in bulls from 53.8% to 56.5% and a decrease in bears from 22% to 20.7%. That's a bull to bear ratio of 2.7 to 1 - way too many bulls vs. bears. Historically it means that the market is close to topping. But as I said yesterday, there is some evidence that investors are talking bullish but are too cautious to put their money to work. As a result, there may be a lot of money on the sidelines waiting to get in. If that's the case, every little dip will be met by strong buying.

Larry

Larry

Thanks for the crisp clear explannation. You really have the knack of explaining, better than most financial experts I have "heard". Can you dwell into
other application of Investors intelligence reports?
Thanks

Jay Adam

Jay,

The basic idea in following any sentiment indicator (Investors Intelligence is just one) is that it gives you an idea as to the relative bullishness and bearishness or market participants.

When market participants get too bullish, it could be an indication that everybody who is going to buy has bought. Therefore, there is nothing left for them to do but sell. So too much bullishness is bearish for the market. And, of course, the mirror image of that phenomenum would be true if there is too much bearishness.

I don't think you can trade just based on sentiment indicators alone. For example, as I have been stating, we may be looking at a situation where market participants have indicated that they are bullish, but they haven't committed their capital yet. In fact, I think that's what may have been holding this market up for the past couple of weeks after the sentiment indicators showed too much bullishness in relation to bearishness. It's only when market paricipants are not only bullish, but they are acting on their bullishness, that we are likely to see a market reversal of any consequence.

Larry