Harry Peterson
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Stock investors haven’t been this bearish in 15 years

Pessimism is a bullish sign, contrarian analysis suggests

Bearishness has reached an extreme not seen at least since the top of the Internet bubble in early 2000.

Yet this is a bullish omen, according to the inverse logic of contrarian analysis: Extreme levels of bearishness indicate that there is a very robust “wall of worry” for the market to climb.

These at least are the conclusions that emerge upon analyzing the average recommended equity exposure among a subset of Nasdaq-oriented market timers (as measured by the Hulbert Nasdaq Newsletter Sentiment Index, or HNNSI). Since the Nasdaq responds especially quickly to changes in investor mood, and because those timers are themselves quick to shift their recommend exposure levels, the HNNSI is the Hulbert Financial Digest’s most sensitive barometer of investor sentiment.

What particularly stands out about the latest HNNSI readings is not that it’s low, though it is. What’s noteworthy is that its current level is a lot lower than where we would otherwise expect it to be, given the market’s recent action.