Tags: stock | market | bearish | bullish

Stock Market Sentiment Dampens, Leading to Anticipation of Correction

By Dan Weil   |   Tuesday, 26 Feb 2013 07:49 AM

Stock market investors are losing some of their bullishness as prices stagnate, leading many to believe that a correction is in order.

Despite the rise of the Standard & Poor’s 500 Index to a new five-year high last week, it is little changed since Feb. 1.

Experts say fundamentals aren’t as bright as many investors were painting them during the market’s upward surge in January, The New York Times reports.

Editor's Note:
Billionaires Dump Stocks. Prepare for the Unthinkable.

In fact, the most recent Investors Intelligence report shows the percentage of investors who are bullish fell to 48.4 percent from 54.7 percent two weeks ago, while the percentage of investors who are bearish increased to 22.1 percent from 21.1 percent.

Moreover, the American Association of Individual Investors’ AAII Index shows the percent bullish fell to 41.8 percent last week from 42.3 percent the week before, while the percent bearish jumped to 32.5 percent from 28.7 percent.

First, there’s the $85 billion of automatic spending cuts that begin March 1. Then there’s the economy, which most analysts expect to grow only about 2 percent this year, even without the sequester.

As for earnings, 79 companies in the S&P 500 have warned that their future profits won’t meet analysts’ consensus forecast, while only 19 have said they will exceed expectations, according to Thomson Reuters cited by The Times.

“The optimism that got built into the market assumed that things were going to get a lot better,” Bruce McCain, chief investment strategist at Key Private Bank, tells The Times. “Truly, things are not getting really good. They are just so-so, as they have been.”

As a result, “everybody is looking for some type of pullback” in stocks, Timothy Ghriskey, chief investment officer at Solaris Asset Management, tells The Times.

Marc Faber, publisher of the Gloom, Boom & Doom Report, is one who expects a correction.

He believes the five-year high of 1,530.94 that the S&P 500 reached Tuesday may become a ceiling for the market.

“I think we have made the top, and it could be a longer-term top,” Faber tells CNBC. “I don't think the market is as overbought as it was in 1987, so I don't expect a crash.”

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

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