A reader posted a comment/question on my article about February's performance of dividend payers versus non payers curious if the market sentiment is one where investors are in the denial phase of the sentiment cycle. Several articles today made reference to the fact investors are leery of the market at this stage, in part due to the strong advance off of the March 2009 lows.
- Bull Market Fails To Address Aversion to U.S. Stocks ($)-WSJ
- Stock Market Rebound Shows its Age at 1-Year Mark-AP
Below is a 2-year chart of the S&P 500 Index (SPX) with notations that coincide with a chart that was first publish in 1991 by technical analyst Justin Mamis in a book titled The Nature of Risk. The chart depicts investor sentiment at various stages in the market's cycle.
The market will hit resistance at around the 1,150 level on the S&P 500 Index. Additionally, the recent advance has been occurring on lower volume that may be a sign of investors in disbelief regarding further advance at this point in the cycle.
In short, I believe investors appear anything but confident or enthusiastic at this juncture. Even fund flow data shows investors are placing more money into bond funds than into equity funds.