Investors Intelligence Bulls Below 40% a Bullish Sign for the Intermediate-term

Jim Cramer over at thestreet.com recently had the following to say... "one of
my most beloved indicators, the bull/bear ratio, has hit a level that simply
means you cannot have a big hit to this market, and that level is the 36% bull
level... any time we get the bull cohort below 40%, I have to buy something;
and when it gets too close to 35%, you have to cover all shorts and get long.
"

I assume he's referring to the Investors Intelligence survey given that this
was written last Wednesday, the day of the survey's release. And after
reviewing the data this weekend, I have to agree that from an intermediate-
term perspective, downside potential does appear limited. Just looking for any
weekly reading below 40% (from above 40%) is a good indicator that higher
prices are likely on an intermediate-term basis. But it really shines when the
S&P is trading at a relative low point. To illustrate, I extracted the last
thirty instances in which the Bullish Consensus fell below 40% and the S&P was
trading below its six-week ago close (as is the case currently). Each
occurrence is listed in the table below, along with the performance of the
S&P500 six weeks later. Note that in 28 out of 30 cases, or 93% of the time,
the S&P was trading higher. That's significantly better that the 62% at-any-
time odds of a higher S&P six weeks later. While this doesn't provide any
clues regarding near-term direction, it does reinforce other intermediate-term
bullish setups that point to higher prices heading into March...

Investors Intelligence Bulls <40%, S&P Below Six-Week Ago Close
02/15/08... S&P500 ??? six weeks later
06/16/08... S&P500 +2.2% six weeks later
03/14/03... S&P500 +7.9% six weeks later
10/04/02... S&P500 +13.7% six weeks later
07/12/02... S&P500 +2.1% six weeks later
09/21/01... S&P500 +12.6% six weeks later
10/15/99... S&P500 +13.6% six weeks later
09/25/98... S&P500 +9.2% six weeks later
09/11/98... S&P500 +6.1% six weeks later
04/04/97... S&P500 +9.5% six weeks later
10/27/95... S&P500 +6.5% six weeks later
04/14/94... S&P500 +2.5% six weeks later
05/07/93... S&P500 +0.3% six weeks later
10/09/92... S&P500 +6.0% six weeks later
06/26/92... S&P500 +3.8% six weeks later
04/10/92... S&P500 +2.4% six weeks later
11/29/91... S&P500 +10.6% six weeks later
01/11/91... S&P500 +16.0% six weeks later
08/10/90... S&P500 -7.2% six weeks later
04/27/90... S&P500 +9.0% six weeks later
01/26/90... S&P500 +3.7% six weeks later
11/10/89... S&P500 +2.5% six weeks later
06/30/89... S&P500 +8.4% six weeks later
03/10/89... S&P500 +5.7% six weeks later
05/20/88... S&P500 +7.4% six weeks later
10/23/87... S&P500 -9.8% six weeks later
09/26/86... S&P500 +5.8% six weeks later
10/04/85... S&P500 +8.1% six weeks later
02/17/84... S&P500 +2.2% six weeks later
08/12/83... S&P500 +4.5% six weeks later
08/06/82... S&P500 +18.2% six weeks later

Categories : Archived EOD Commentary, End-of-Day Commentary

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