The weak sentiment demonstrated by investors despite the market’s recent rally is a good sign, said Mark Hulbert.
Hulbert, a publisher who tracks the performance of financial newsletters, now says the market can rally even higher.
The reaction by investors “suggests to contrarian analysts that there exists a strong wall of worry that the stock market can continue to climb — for at least a while longer,” he wrote in his column on MarketWatch.
Investors remain cautious about buying equities, Hulbert said.
“The average recommended equity exposure among short-term market timing newsletters is just 32.3 percent right now, according to the Hulbert Financial Digest. That's lower than where it stood at the beginning of October, and even lower still than where it stood at the beginning of September.”
This investor behavior is not what is normally shown when the market tops, according to contrarians, Hulbert writes.
“The typical pattern, at such tops, is for advisers and investors alike to stubbornly adhere to their bullishness.”
Passing the 10,000 level is important for investor confidence, however, the Houston Chronicle reports.
“It's just a huge run off the bottom,” said Mark McMeans, chief executive of Houston-based Brasada Capital Management.
“That helps from a confidence perspective. Psychologically, it's important.”
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