Investor Sentiment Data for May 28, 2010

Investor Sentiment Data for May 28, 2010

Stocks just wrapped up their worst month since February 2009 – the last full month of the last leg down of the 08-09 stock market crash.  So how are investors feeling?

Not great – but all things considered, not too bad either.

The Wall Street Journal (one of our favorite contrarian indicators) is running a poll right now that asks readers:

Will June be a better month for stocks?

With the initial precincts reporting, 52.1% of investors expect that things will be better – or at least “less bad” – in June:

Investor Sentiment Data for May 2010Source:

Because the DOW was down almost 8% in May, we can’t interpret these results as overly bullish.  However, they don’t appear to be overly bearish either.

Investor sentiment data can beuseful for identifying market extremes.  Unfortunately, it’s often not that useful in between…which is where we appear to be.

A couple more sentiment data points, courtesy of The Pragmatic Capitalist:

Sentiment continues to deteriorate as the market decline continues.  According to the Investors Intelligence survey bullish further this week to 39.3% from 43.8%.  Despite the decline David Rosenberg is quick to note that we are not yet near the levels where markets generally bottom:

“Be that as it may, it can be argued that at the real lows, the bull camp gets to 26% (historical average) while the bear camp gets to 49%, so we may well have further to go before sending the all-clear signal out.

You can read the full sentiment analysis – with a couple of nice charts – here.

Personally, I’d like to see sentiment a tad more bullish before we re-initiate our S&P 500 short position.  BUT – during bear markets, sentiment can stay in the dumps for extended periods of time, as stocks cascade lower.

Next week should instructive, we think, as to whether this current pop has any legs to it.  Sentiment numbers indicate it may – but our S&P price target range of 1091-1123 was indeed met yesterday.  So we’re at a fork in the road of sorts as we head into the holiday weekend.

Which means, our best bet for right now is probably to grab a cold beverage and fire up the grill.  Enjoy your long holiday weekend!