Warnings that the stock market’s summer rally is overextended have meant nothing in recent weeks, as major indexes have worked their way higher.
Here’s a classic sign of a peaking market: The percentage of investment newsletter writers who are bearish fell this week to the lowest level since October 2007 — the same month the last bull market topped out.
Investors Intelligence, which tracks the market views of about 130 independent investment newsletter editors, says 19.8 percent of the letters now are bearish on stocks, down from 23.1 percent the previous week and the fewest since the 19.6 percent reading of October 2007.
Newsletter editors who count themselves as bulls reached 51.6 percent this week, up from 48.3 percent the previous week and the highest since December 2007.
Editors who aren’t bullish or bearish are considered to be in the “correction” camp, meaning they expect a short-term market pullback. Their ranks total 28.6 percent of those surveyed, the same as the previous week. The newsletter survey, which dates to 1963, often functions as a contrarian indicator: When sentiment reaches extremes, it’s usually a good idea to bet against the crowd.
But John Gray, an analyst at Investors Intelligence, said many barometers of the market’s health have held up relatively well this month, suggesting that stocks aren’t about to fall off a cliff. The market overall likely will churn around current levels for the near term.
This week’s Investors Intelligence survey reading of 51.6 percent bulls, though the highest since late 2007, still is significantly below peak levels when market optimism is really flying high. Bulls topped out at 62 percent in October 2007, for example.
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