AssetPreserver News

The Investors Intelligence Advisors Sentiment (IIAS) index, which gauges the stock advice of about 150 newsletters and other paid market-advice outlets, said the portion of positive stock advisers jumped to 51.6% in the past week, the highest since December 2007. That is approaching the 60% reading scored in late 2003 and early 2004.

Bears fell to 19.8%, the first time since October 2007 that the percentage fell below 20%.

A parallel with October 2007 is notable because the S&P 500 hit a peak that month and then tumbled for 17 months, losing nearly two-thirds its value by the time it hit a March low.

Since mid-July, the S&P 500 has jumped 17%. It’s up 54% since hitting March lows.

Analysts frequently use stock sentiment gauges as contrarian indicators. When positive sentiment gets high, a lot of cash has already moved from investors’ savings into the market, leaving less available cash to drive stocks higher.

The IIAS survey is taken once a week, on Friday, and the results published Wednesday.

Typical use of the IIAS indicator is this: if less than 40% of advisors are bullish, then that is often seen as a positive. After all, the trend followers are likely to be incorrect at important reversals. Meanwhile, a reading between 41% and 54% is considered neutral. Survey results of over 55% bulls tend to be bearish and warn of an eventual market top. If the number of bears is below 20% that is a cause for concern that there are too many bulls which is also indicative of an intermediate market top.

“What positive sentiment means is that stock advisers have been recommending people buy stocks, minimizing their cash holdings, presumably,” said John Gray, an editor at the Investors Intelligence stock research service.

The drop in the portion of bearish advisors and a rise in the portion of bulls pushed the gap between them to 31.8. That’s the widest positive margin since late 2007. But it’s still off levels reached above 40 in October 2007.

What’s this mean to me?
According to the IIAS The market is heating up and due for a pullback. Don’t be afraid to take profits. But don’t rely on just one indicator, either.