ETF Trends
ETF Trends

Exchange traded funds that follow riskier sectors such as emerging markets, high-yield bonds and financial stocks have been popular lately, signaling confidence in the strong rally to start the year.

However, U.S. stocks are nearing the 2011 high that triggered the swift drop in early August. With sentiment indexes showing an elevated number of bullish investors, some are worried about another steep correction. [Sector Rotation Favors Riskier ETFs]

Apple’s (NasdaqGS: AAPL) dramatic turnaround back below $500 a share this week is also being closely watched due to the stock’s impact on sentiment and the overall market. [Apple Nears 17% of Nasdaq Index on Rally]

As of Feb. 15, the number bulls in the Investors Intelligence advisor sentiment survey rose to 54.8% from 52.1% a week earlier. The percentage of bulls is nearing the 57.3% peak in April 2011. [Is Bullish Sentiment a Warning Sign for Stock ETFs?]

“That time frame was when the NYSE averages were achieving peaks that are only now being tested,” Investors Intelligence said. [ETF Flow Data May Not Tell Whole Story]

The number of bears fell to 25.8% from 28.7% the previous week. Meanwhile, the difference between bulls and bears favors the bulls by 29%, advancing sharply from the previous week. It is the widest spread in over nine months.

Separately, The American Association of Individual Investors survey reveals that bullish sentiment fell to 42.7% in the week, while bears rose to 26.6% as of Feb. 15.

iShares S&P 500 (NYSEArca: IVV)

Full disclosure: Tom Lydon’s clients own AAPL.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.