Is the Public Investor Getting too Bullish?

Our Psychology Composite moved back to P4 this week, and the Monetary Composite barely shifted once again over the threshold that separates M1 from M2 at the end of last week.  Here's where it stands this morning.

I've seen a couple of reports lately telling me the public investor is turning bullish; however, the charts below paint a different picture.

When I look at the ISEE Sentiment Index below, I see NO bullishness - only fear.  This is a pure-and-simple small speculator (public speculator) sentiment gauge.

There is no doubt in my mind, this tells the story of how investors were buying into the global scene and the commodity story in 2003 and 2004.  They had recovered somewhat from the Technology Bubble bursting of 1999-2003.  The speculators were buying energy, commodities and international stocks, but in 2006 and 2007, as the big bank collapse came along, and by July 2006 as stocks were hammered and the Fed had tightened the monetary noose past the choke point, the public peculator gave it up.  The public gave it up.  The financial crash of 2008 and the massive budget crisis was simply too much.  Don't forget, either, the baby boomers were reaching the age of 65 and thinking security.

Admittedly, in January's strong move, the public did move into equity funds, but the last two months have certainly squashed that.  You can compare the stock purchases of equity funds to that of bond funds in the charts below from Scott Grannis' blog (

There is an old spiritual song called "A Great Day is Coming."  I don't want to be too mundane about it or denigrate the theme of that song, but that is exactly what I feel for the US and for the stock market.  The stock market is telling a very exciting story.  So far, the public investor is not listening...but you can bet on it, they will.

Don Hays

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