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“Bullish measures are getting really bullish.”

This is an interesting statement, given how “bearish” sentiment was in 2022. As I noted then:

“Investor sentiment has become so bearish that it’s bullish.

One of the hardest things to do is go “against” the prevailing bias regarding investing. Such is known as contrarian investing. One of the most famous contrarian investors is Howard Marks, who once stated:

“Resisting – and thereby achieving success as a contrarian – isn’t easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, particularly when momentum invariably makes pro-cyclical actions look correct for a while.

Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it’s challenging to be a lonely contrarian.”

Here is that article’s composite index of retail and professional investor sentiment to visualize just how negative sentiment was then. You will note that sentiment was pushing levels of bearishness not seen since the 2008 “Financial Crisis.”

When levels of negativity reach very low levels, such historically equates to short- to intermediate-term market bottoms. Such is because excesses get built with everyone on the same side of the trade. At that time, everyone was so bearish it was a bullish measure. As we stated then, “the reflexive trade will be rapid when the shift in sentiment occurs.”

Looking back, it is pretty evident such was the case, particularly with the QQQ believed to be dead.
Of course, hindsight is always 20/20. Last year there were many reasons to be bearish. Things were seemingly so bad, with everyone expecting a recession, that there was nowhere to go but up. Since October, market participants have been betting on avoiding a recession. Such has led to a sharp reversal in bearish sentiment as the “Fear Of Missing Out,” or FOMO, kicked in.

Since the end of January, despite the Fed hiking rates, a bank solvency crisis, and weakening economic data, the market has continued to “climb a wall of worry.” In fact, not only did it climb a wall of worry.