I have written about the Investors Intelligence Survey several times before. The survey looks at the newsletter editors and measures whether they are bullish or bearish and then looks at the difference between the two.
Last Wednesday, the latest report was released and it showed that the bullish percentage jumped to 57.3 from 51.6, which is one of the biggest one-week jumps in the last two years. The bearish percentage dropped to 15.7 from 23.1.
The combination of the jump in bulls and drop in bears created a differential between the two of 41.6. This is the largest differential between bulls and bears in the last four years.
The previous high differentials came last April (before the second-quarter correction), December 2009 (right before a one-month correction of 8.8 percent) and in October 2007 (right before the 17-month bear market).
Based on the results from these previous signals, it looks as if we are in for a correction.
It could be a short one-month correction or a more prolonged one.
I don't think we are looking at the start of another bear market, but you never know.
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