Barron's Big Money Poll Bullish Consensus Reaches a Record High

This week's Barron's magazine contains the latest Barron's 'big money' poll. Evidently they interviewed a herd – there was once again near unanimity on a number of markets. The bullish consensus on US stocks clocked in at a new all time high for the Barron's poll with 74% of those surveyed declaring themselves 'bullish or very bullish on US stocks'. Only 7% are pessimistic. By contrast, only 45% were bullish in the spring of 1999 and 54% in the fall of 1999. One third of those taking part in the survey expect the DJIA to reach 16,000 points within about one year, 25% think it will go higher than that.

That is just for the US stock market, mind. Apparently there is a separate category asking about 'stocks in general', as well as about real estate. This has to be seen to be believed:


“Even so, the managers aren't just bullish on U.S. stocks, but on equities generally. Some call it the TINA trade, for "there is no alternative" to stocks in a slow-growth, ultra-low interest rate world. Eighty-six percent of poll respondents are bullish on stocks for the next 12 months, and a whopping 94% like what they see for the next five years. Real estate has similar approval ratings.


(emphasis added)

Nothing can go wrong! Maybe we should type that in all caps, so that it goes better with the “94% that like what they see for the next five years”. An appropriate cartoon accompanied this unabashed show of giddiness.


barron'sThe 'big money' is up to its eyebrows in stocks and giddy like never before …


Not surprisingly, the bearish consensus on treasury bonds was once again the standout of the poll (for the umpteenth time in a row, bonds proved to be the most hated asset class by far) with 89% bearish on bonds and a full 92% declaring bonds 'overvalued'. Gold bulls can finally breathe a small sigh of relief: In October last year, 69% of money managers declared themselves bullish on gold, but this has now been cut down to just 35%, with 65% bearish and only 11% believing it will be the best performing asset class over the next year. Japan's stock market has found new converts – in October of last year, only 24% were bullish on Japan, right on the eve of the biggest rally since 2005. Now 62% are bullish on Japan, but only 13% think it will be the 'best performing market' over the next six to 12 months.




The details: 86% are bullish on stocks and real estate, only 11% are bullish on treasury bonds. Cash is the second most hated asset, gold is in third place, with 65% bears.



Our conclusion would be that it is probably best hold cash, treasury bonds and gold. Whenever this poll reveals extremes of opinion, it is usually a good time to look the other way.


US Stock Market Technical Conditions

We want to show a few charts briefly illustrating the technical backdrop to all this euphoria. Before we get to that, a few words regarding corporate earnings, which many survey participants cited as a major reason to remain bullish in what is, in John Hussman's words, a market suffering from “overvalued, overbought, overbullish” syndrome. In the third quarter of 2012, SPX earnings growth was actually negative; in the fourth quarter, a small gain was squeezed out. The first quarter of 2013 seems very likely to once again produce negative earnings growth. Of course many companies were still 'beating expectations' in the second half of 2012, as they jumped over the much lowered bar of continually declining earnings estimates. A significant number of prominent companies have no longer managed this feat in the current earnings season. Not even IBM, the world champion in 'earnings management', was able to beat expectations this time. This is no wonder, as there are what some consider 'depression-like conditions' in the euro area (for several countries that is certainly an apt description), where for example car sales have just fallen to a 20 year low, with severe declines recorded in a number of countries, including Germany with – 10% (Portugal: – 47.4%, France – 20.7%, Italy – 16.9%, etc.).

However, not only is the fundamental picture not as convincing as the bulls seem to think (in an example of the 'the market writing the news' to quote Bill Fleckenstein), but there are also a number of negative technical developments. We hasten to add that previous dubious technical developments have proven meaningless so far, but that is obviously not an immutable condition.




The SPX daily: RSI and MACD diverge from price for the second time in a row – click to enlarge.



RUT-SPX ratio

The Russell 2000/SPX ratio – small cap stocks are underperforming- click to enlarge.




The NDX and the NDX-SPX ratio (black line): big cap tech stocks are underperforming the SPX, and most recently the  NDX has peaked at a lower high versus a higher high in the SPX- click to enlarge.



The Barron's survey is not the only sentiment datum showing extreme bullish sentiment. Consider as an example the Hulbert Nasdaq sentiment index of stock market newsletter writers. Their recommended net long exposure was recently right back at a record high, which incidentally slightly exceeded the extreme seen at the March 2000 Nasdaq top.



Hulbert Nasdaq sentiment

Hulbert Nasdaq sentiment – just a few ticks off a record high- click to enlarge.



Since we have mentioned the Nikkei index above, it should be noted that its tendency to top out in March (which has quite a tradition) has been violated this year, as it is late April and it evidently still rising. However, the market continues to look severely overbought and ripe for a correction.

Obviously the BoJ's new 'pro inflation' mandate has helped inflate the Nikkei in anticipation, but that means ultimately that it is rising for the wrong reasons. It may also have merely lengthened the usual cycle (the rally did begin at the 'right' time). Still, from a practical perspective this means one has to continue to give the market the benefit of the doubt for now, especially if the peak of the current rally cycle continues to be pushed out further. As we have pointed out previously, that would be a change in character for this market.

Note however that a confluence of resistance levels is not too far from current levels. Moreover, there is a growing RSI-price divergence visible on the daily chart as well.




The Nikkei daily – a growing RSI-price divergence is in evidence- click to enlarge.




The Nikkei weekly – the red line indicates a strong level of lateral resistance. Note also that when the Nikkei became as overbought as currently on a weekly basis in the past, a sharp and swift correction soon ensued – click to enlarge.



Lastly, John Hussman also writes about the Barron's poll in his weekly missive, and has included the following chart as a reminder that magazine covers showing overconfident bulls in various stages of giddiness often represent a warning that the market is in dangerous territory. We should add that it isn't a bearish sign every time when Barron's features a bull on its cover. It is only remarkable in the current instance because of the poll results discussed above.




Via John Hussman: Barron's covers near significant caveat emptor moments in recent market history- click to enlarge.




To summarize all of the above: from a technical perspective it appears as though the recently begun short term correction is probably not yet over. The Barron's big money poll meanwhile suggests that there exists now significant medium to long term risk in the market.

With only 7% pessimists left, who is left to buy? One hope expressed by the fund managers interviewed was that the recent record inflows by individual investors into stock funds will continue and drive the market higher (in other words, they are in expectation of the arrival of greater fools). We believe this is a flawed theory, based on demographic considerations and the fact that many people have been worn out by the secular bear market's ups and downs. A market where performance and sentiment remain at odds with each other continues to be the US treasury bond market, which the 'big money' has hated with a passion for many years now. The pronounced bullish sentiment on gold that was still visible in late 2012 has been vaporized by the recent decline in the gold price. In our judgment, the 'big money' clearly suffers from what is known as 'recency bias'.



Charts and tables by: StockCharts, BigCharts, Sentimentrader, Barron's, John Hussman




Emigrate While You Can... Learn More




Dear readers - we want to once again thank all of you who have supported us with donations.


To donate Bitcoins, use this address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke


Thank you for your support!

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • testa-e-collo-di-cesareWhy Do We Let Other People Tell Us What to Do?
      Lame Theories of Government We have been disappointed with political ideas and theories of government. They are nothing but scams, justifications, and puffery. One tries to put something over on the common man… the other claims it was for his own good… and the third pretends that he’d be lost without it. Most are not really “theories” at all… but prescriptions, blueprints for creating the kind of government the “theorist” would like to have. Not surprisingly, it is a...
  • goldmine-700x360Gold and Gold Stocks – Back to Tricky, but Interesting Signals Emerge
      A Relentless Short Term Decline When we last discussed the gold sector, we noted that with gold approaching its 200 day moving average, a pullback had to be expected soon. In the meantime, a bit more than just a pullback has happened, as a severe sell-off started after the October FOMC announcement.   Photo via   However, as you will see below, this has most likely merely reset the clock a bit in terms of anticipating a medium term trend change (even if...
  • MponengGold and Gold Stocks – It Gets Even More Interesting
      Technical Backdrop If only we could get a dime for every bearish article on gold that has been published over the past two weeks...but one can't have everything. When a market is down 83% like the HUI gold mining index is, we are generally more interested in trying to find out when it might turn around, since it is a good bet that it is “oversold”. Of course, it if makes it to 90% down, it will still be a harrowing experience in the short term. We like these catastrophes because...
  • resultThe Greatest Racket of All Time
      The Successes of the Global War on Terror One would think that the so-called “Global War on Terror”, which has been given fresh impetus by the Paris attacks, must be going swimmingly. What else could explain the great enthusiasm with which it is pursued? It may be recalled that it started in earnest after the WTC attack – also a declaration of war, as it was put at the time. As is often the case when Islamist fundamentalists strike, the actual attackers immolated themselves on...
  • winterThe Long, Cold Winter Ahead
      Not Immune Cold winds of deflation gust across the autumn economic landscape.  Global trade languishes and commodities rust away like abandoned scrap metal with a visible dusting of frost.  The economic optimism that embellished markets heading into 2015 have cooled as the year moves through its final stretch.   Photo credit: David Byrne   If you recall, the popular storyline since late last year has been that the U.S. economy is moderately improving while the...
  • santaHow Do People Destroy Their Capital?
      There is no Santa Claus I have written previously about the interest rate, which is falling under the planning of the Federal Reserve. The flip side of falling interest rates is the rising price of bonds. Bonds are in an endless, ferocious bull market. Why do I call it ferocious? Perhaps voracious is a better word, as it is gobbling up capital like the Cookie Monster jamming tollhouses into his maw. There are several mechanisms by which this occurs, let’s look at one...
  • oil rigJunk Bonds Under Pressure
      While the Stock Market is Partying ... There are seemingly always “good reasons” why troubles in a sector of the credit markets are supposed to be ignored – or so people are telling us, every single time. Readers may recall how the developing problems in the sub-prime sector of the mortgage credit market were greeted by officials and countless market observers in the beginning in 2007.   Photo credit: Getty Images   At first it was assumed that the most highly...
  • Young-European-Jihadists-ChappatteAngry Belgian Muslims and the Price of Welfare Statism
      Ill-Tempered Mohammedans in the Socialist Paradise In the wake of recent revelations about the identities of the morons involved in the horrific Paris attacks (happily, most of them shuffled off the mortal coil as well, thereby improving the aggregate degree of moral clarity and intelligence in the world), a friend pointed us to an article at Unz Review that asks: “Why Does Belgium Have Such Angry Muslims?” Our instinctive, immediate reaction was to argue that the bland, boring...
  • Chart-intraday averageCan Investors Trust the New Gold Fixing?
      Statistical Analysis of the New Gold Fixing   Since 20 March 2015 a new gold price fixing organized by the London Bullion Market Association has been in operation. It has replaced the previous price determination process, which was in place for more than a century and became subject to criticism as it was highly vulnerable to manipulation. Has manipulation now ceased?   Gold fixing at N.M. Rothchild and Sons offices in London. The first fixing took place there on 12 September...
  • trudeau-harperIncumbents Swept from Office Around the World
      Election Trends in 2015 – No Incumbent is Safe In the political sphere, this year has started with a bang, when Syriza won the Greek parliamentary election. All of Europe's attention was focused on this outcome and its aftermath over the coming six months or so. As it turned out, it was a bad omen for political incumbents nearly everywhere. More recently, we have seen the government of Stephen Harper in Canada go down in flames, with its opponents winning an unexpected landslide...

Support Acting Man




Own physical gold and silver outside a bank

Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Buy Silver Now!
Buy Gold Now!