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DP ALERT: Sentiment Is Too Bullish

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The NAAIM Exposure Index hit 106.56 this week, which is the second highest reading in the history of this indocator (the highest being in December 2017, a few weeks before the January 2018 market top).

NAAIM (National Association of Active Investment Managers)member firms who are active money managers are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day of the week, currently Wednesdays. Responses can vary widely as indicated below. Responses are tallied and averaged to provide the average long (or short) position of all NAAIM managers, as a group.









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In spite of the wide range of possible responses (200% long to 200% short), the average response is usually somewhere between zero and +100. On rare occasions the average has been below zero (slightly short), or slightly above +100. As investors, we should be somewhat wary when readings reach the extremes of that range, because too many people are getting on one side of the boat. Currently, investors are too bullish, and that could be telling us that we're very near a price top.


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I don't rely on sentiment indicators very much these days, because I have trouble sorting through the ambiguity of the readings -- notice on the chart how often the high readings do not coincide with important price tops. Nevertheless, considering that the current high sentiment reading comes after a vertical, five-month market rally, it could be that the bullish side of the boat is getting a little too crowded.

Happy Charting! - Carl


Technical Analysis is a windsock, not a crystal ball.


Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.


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Carl Swenlin
About the author: is a veteran technical analyst who has been actively engaged in market analysis since 1981. A pioneer in the creation of online technical resources, he was president and founder of DecisionPoint.com, one of the premier market timing and technical analysis websites on the web. DecisionPoint specializes in stock market indicators and charting. Since DecisionPoint merged with StockCharts.com in 2013, Carl has served a consulting technical analyst and blog contributor. Learn More
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