The U.S. Stock Market: A Counter-Trend Rally

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The Unusual Bullish Sentiment

Typically, a six-session rally in the stock market would be met with skepticism from market timers. However, this time around, things are different. Since the market’s low on October 3rd, the S&P 500 has gained 3.5%, and the Nasdaq Composite is up by 4.6%. These returns have caused market timers to exhibit a level of bullishness that exceeds expectations based on historical data.

Analyzing Market Timer Sentiments

To gain a clearer understanding of the current sentiment, let’s take a closer look at the average exposure level of stock market timers. The Hulbert Stock Newsletter Sentiment Index (HSNSI) provides us with valuable insights into this metric.

Since October 3rd, the HSNSI has experienced a substantial 35.6 percentage point increase. This is almost four times higher than the expected increase of 9.8 percentage points based on a two-decade analysis of similar rallies that resulted in a 3.5% gain in the S&P 500.


Based on the current market timers’ sentiments and historical data, it appears that the recent rally may not be as sustainable as some would like to believe. While it’s important to remain cautious, further analysis is required to fully understand the long-term implications of this counter-trend advance in the U.S. stock market.

The Surprising Sentiment in the Equity Market

A fascinating story is revealed by a sentiment index that my firm has created, focusing specifically on equity exposure levels among Nasdaq-focused stock market timers. This index, known as the Hulbert Nasdaq Newsletter Sentiment Index (HNNSI), provides valuable insights into investor behavior.

Since October 3, the average equity exposure levels measured by HNNSI have surged by an astonishing 34.1 percentage points. This significant increase is nearly double the 17.4 percentage point rise that historical data would suggest following a 4.6% gain in the Nasdaq Composite.

To put this astonishing surge into perspective, let’s compare it to the reaction of market timers during the first six trading days of the bull market that began a year ago on October 12, 2022. During that period, the Nasdaq Composite rose by 6.1%, slightly more than its recent increase of 4.6% over the last six trading sessions. However, the HNNSI experienced a far smaller increase of 13.3 percentage points, significantly lower than the 34.1 percentage points recorded since October 3 this year.

These findings shed light on why contrarian investors are skeptical about the current rally.


Market sentiment in the equity market has reached unprecedented levels of optimism among Nasdaq-focused stock market timers. The surge in equity exposure levels, as illustrated by the HNNSI, has far exceeded expectations based on historical data. Contrarian investors remain cautious, cautious about the sustainability of this rally.

More: Why U.S. stocks look set for a fourth-quarter rally led by Big Tech, says a Morgan Stanley portfolio manager

Plus: Dividend stocks are dirt cheap. It may be time to back up the truck.

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