Thursday, July 01, 2004

The latest AAII sentiment survey, tallying responses through yesterday, came out with 57% bulls (up from 56%) and 16% bears (down from 23%).  This is the largest display of bullishness since early April. The pieces of excessive bullishness are falling in place, and it is becoming more and more apparent that any upside breakout will likely fail. 9:20:38 AM

You'll note on the site that the Rydex Beta Chase Index closed yesterday over 18 (meaning these traders are 18 times more likely to invest in a high-risk fund than a low-risk fund).  This is eclipsed only by 3/21/03.  Also, the % of asset in the money market is at its lowest point since February 2001.  Both of these are very troubling signs of excessive comfort in the current market. For the short-term, though, it is the first of the month.  If you pull up the monthly seasonality charts on the site, you can see that July is typically positive the first few days (plus the holiday is coming up).  The first day of the month has been up very consistently, with this year seeing five of six positive (same for the second day of the month).  It's hard to fight that and win consistently, but the Rydex data is suggesting whatever upside we may get could be temporary. 7:49:59 AM