We have been away from the markets for a few days, but not a lot has changed in the stock market. It continues to rise in a steady fashion…as the bulls still have a tight hold of the reins. We have seen a shift in sentiment, however. As we highlighted last week, we have gone from a situation where bullishness was very, very low at the beginning of October…to one where it is quite high once again.
For instance, the Investors Intelligence data shows bullishness has jumped from 40% to the mid 50’s over the past 4-5 weeks…and the DSI data shows that bullishness among futures traders has jumped all the way to 93%. (In fact, it has been 93% for each of the past two days on the Nasdaq.)…..We also have a plethora of people calling for a “melt-up” in the stock market into the end of the year. We highlighted three firms who used that term last week…and we heard two more talk about it over the weekend. (These two newer ones did not use the term “melt-up”…but they’re calling for 5,000 on the S&P 500 by year-end, so that’s still in the “melt-up” territory…after a YTD move of +25% already.)
Of course, just because a lot of people have become bullish (many of them VERY bullish) does not mean that the market cannot rally further for a while. There are certainly several reasons to think that it can. However, there is no question sentiment is now something that belongs on the bearish side of the bull/bear argument.
A lot of people will be focused on the impact that TSLA may have on the Nasdaq. It is 6.4% of the NDX Nasdaq 100 and it is down 4%-5% in pre-market trading. We’d also note that two other stocks ...