The Barron's Big Money Poll Is Not a Good Measure of Today's Sentiment

If your immediate reaction to the Barron’s cover story this weekend is bullish, let’s just drill down a bit.

First, for those who don’t know, Barron’s does a Big Money Poll every six months where they ask their folks a variety of questions about the market. Sometimes they are correct, sometimes they are not. Like most market participants.

This week’s story announced that their folks are the most bearish they have been in 28 years (1997). Holy smokes, that’s a lot. Think of that: that is more bearish than they were in the Great Financial Crisis, when the banking system was near collapse.

If you are wondering what it was that caused such bearishness, for a bit of background, the fall poll is taken in September/October. A look back at 1997 will show you the market peaked in August, a few weeks after Thailand revalued their Baht. The remainder of the summer, one after another, the Asian countries revalued their currencies. That’s the seven percent correction you see in August.

But we rebounded and made a higher high in early October. Then we plunged. In mid-October, the S&P plunged just over ten percent in three days (yes, I know folks get hysterical when that happens now, and they think it’s all ‘algos’ but plunges like this are not new.). Anyway, that was the culmination of that particular leg of the Asian Financial Crisis. Although, notice that January saw yet another plunge before we could finally put that particular chapter behind us.

Back to the current Big Money Poll. If we dig deep, we can see that the poll was taken in late March with a follow-up question in early April. Well, heck, think back a month ago, that’s when we were heading into Panic. That’s when every sentiment indicator I follow showed Panic. Of course, this one did as well.

My guess is if Barron’s took this poll in the last week, the results would not be nearly as bearish as they were a month ago. That’s not to say they would be bullish (I doubt that), but I seriously doubt we’d see such levels of bearishness today.

We are overbought, and I do expect we will see a pullback this coming week. I also expect that after a pullback, we will see another rally. The reasoning is that the intermediate-term indicators are not yet overbought. I anticipate we’ll see that occur around mid-May.

I also believe that if we see the market pullback and then another rally attempt, it will have given the sentiment indicators a chance to show what is now only anecdotal in terms of increased bullishness. Just think how a pullback followed by another rally would get the bears over the fence.

One final word on VGK, an ETF to be long the European markets. I still have that unfulfilled target in the low 80s on VGK, but with this new high knocking at resistance (blue line) I would not be surprised to see a pullback there as well. Especially if the Dollar Index rallies as I expect it will.