Equity market investor sentiment has turned optimistic after last week's "extreme optimism" reading as the extremes in selling have slowed amongst the "smart money". They are by no means bullish, but rather, they are just less bearish. The "dumb money" remains extremely bullish. See the Equity Market Investor Sentimeter below, which is our most comprehensive sentiment indicator. This indicator is constructed from 10 different data series including opinion data (i.e., how do you feel about the market?) as well as money flow data (i.e., where is the money going?). This is the current state of equity market investor sentiment.

Investors continue to put a great deal of credence into the notion that the Federal Reserve has backstopped the market. Last week's parabolic readings in the indicators would suggest that this belief is strong. We believe these are signs of the current speculative market environment, which is characterized as being dislocated from the underlying fundamentals and technicals. It is late in the rally for sure, but it takes "bulls to make a bull market", and this is all we are seeing. Meaningful short term gains can be had in these circumstances although risks are high.

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