Archived IMT (2009.05.06)

Here's the study I mentioned earlier this morning CNBC about sentiment remaining typical of previous bear market rallies and NOT of bull market rallies.

According to the sentiment index of the Hulbert Stock Newsletter Sentiment Index (HSNSI), which tracks the advice of more than 160 financial newsletters since 1980, both of the last major (more than 25%) bear market rallies (Sep 2001 to Jan 2002 and Nov 08 to Jan 09), the HSNSI jumped 85.8 percentage points, and 62.4 percentage points respectively. That compared to ONLY 29.3 during the first 8 weeks of past BULL markets (not bear market rallies). Sentiment of the current market rally is 53.8, which is as high as thoe previous bear market rallies. Other sentiment indices, such as the American Association of Individual Investors shows that sentiment is at 24.1, which is similar to levels of those 2 bear market rallies (26.6 and 28.2), in contrast to ONLY 9.8 sentiment index in the first 8 weeks of bull markets.

In simple english, sentiment is roughly 3x greater during bear market rallies than it is in bull markets.