Market sentiment can be measured in two ways; bets made by traders such as Put and Call options, or by polling. Market Vane began polling market opinions in 1964. Their Bullish Consensus is the degree of bullish sentiment for a particular market, such as Gold. The Bullish Consensus is compiled by tracking the buy and sell recommendations of leading market advisers and commodity trading advisers relative to a particular market.
High Bullish Consensus numbers tend to correspond to market peaks, low numbers relate to bottoms. Because professional are polled, market climax bottoms/tops frequently come on divergent readings. A poll taken of non-professional traders would probably show maximum readings occurring at market extreme highs/lows.
The weekly S&P 500 (SPX) chart courtesy of Trading View illustrates Market Vane Bullish Consensus readings for the S&P 500.
Notice the bullish divergent reading made at the SPX major bottom in March 2009 which had a higher reading vs. the October 2008 bottom.
The 39% reading made at the 2011 bottom represented a double bottom for Bullish Consensus and a potential significant SPX low, which is what happened.
The 70% reading in 2013 was almost in the middle of the strongest and steadiest phase of the entire secular bull market, Note the bearish divergent reading made in May 2015 just prior to a multi-month bear phase.
The highest Bullish Consensus reading in early 2018 corresponded exactly with the highest weekly RSI number. Later in September 2018 both Bullish Consensus and weekly RSI had bearish divergences, signaling a potential decline.
The crash in early 2020 was so fast and powerful it created not only the lowest Bullish Consensus number of the entire bull market but also and extreme reading simultaneous with the SPX bottom.
So far since the crash, 53% has been the highest reading and perhaps setting up a Bullish Consensus double top vs. the February 2020 top. Since early January 2021 the 53% reading has appeared three times.
01/12/21 = 53%
01/26/21 = 53%
02/09/21 = 53%
The SPX all-time high was made on 02/16/21 the bullish consensus reading that week was 52%. The next week reading was 49%. This drop in consensus as the SPX made a new high and subsequent small decline could be the prelude to further decline for US stocks. That decline could come very soon.
Traders are short 25% non-leveraged SPX related funds as of the open 01/07/21. Continue holding short.