Mark Hulbert, editor of Hulbert Financial Digest, is bearish on stocks. But he thinks they have room to rise further before they decline.
And why is that?
"Investors’ mood has quickly soured in recent days, potentially setting up the stock market for a short-term bounce," he writes on MarketWatch.
"As a contrarian, I get uneasy when too many begin to agree. And over the past week or so, there has been nothing short of a mad rush to the exits among retail-oriented investment advisers."
The Hulbert Nasdaq Newsletter Sentiment Index (HNNSI) has dropped "an incredible" 75.5 percentage points (to minus 6.7 percent from 68.8 percent) since the Nasdaq Composite stock index hit a 14-year high Sept. 19, Hulbert explains.
He uses the Nasdaq index because it responds especially quickly to changes in retail investors' mood.
"That remarkable shift is just the opposite of the stubbornly held bullishness that is typically seen in major tops," Hulbert writes.
The Nasdaq Composite closed at 4,493.39 Tuesday, down 12.46, or 0.3 percent, from Monday.
Meanwhile, mutual fund manager John Hussman, president of Hussman Investment Trust, thinks stocks are in a bubble.
"Our concerns at present mirror those that we expressed at the 2000 and 2007 peaks, as we again observe an overvalued, overbought, over-bullish extreme," he writes in his weekly commentary. "We currently observe the ingredients of a market crash."
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