Financial advisor sentiment rose in the latest week amid the rally in stocks, while the difference between bulls and bears hit the widest spread since October, according to a survey.
“Many of the editors are drawing lines in the sand at the area of the late October market highs,” wrote John Gray at Investors Intelligence.
“The bulls note the positive rally from lows on Oct. 4 as merely pausing again at the prior highs, primarily held back from Europe’s debt worries,” he added in a report Wednesday. “The bears see only a short term rally in a still developing major new market decline, with major technical resistance immediately overhead ready to turn the direction back down.”
SPDR S&P 500 ETF (NYSEArca: SPY), the $93 billion exchange traded fund, has gained about 5% over the past week and is up 2% year to date. U.S. stocks have recouped most of the loss they suffered in the November sell-off.
The number of bulls in the Investors Intelligence survey rose to 47.4% in the latest week from 44.2% the previous week.
“Sentiment doesn’t become dangerous until the bulls exceed 50%, with most tops showing them near 55%. Many averages achieved their 2011 highs in April when the bulls reached 57.3%. An index breakout from here could see those levels tested with a corresponding shift in advisor optimism,” Gray noted. [S&P 500 ETFs Look to Break Out]
Bears fell to 29.5% from 30.5% a week ago. The number of bears has fallen sharply since the start of October, when the percentage was the highest since March 2009. “That high level suggested many advisors had raised cash,” the newsletter service said. “Now watch for the bears to contract further near 20% if stocks can resume their moves up.”
The difference between the bulls and the bears was 17.9%, up from 13.7% the prior week.
SPDR S&P 500
Full disclosure: Tom Lydon’s clients own SPY.