Confidence has never been higher

It's official - we just reached a record high level of optimism. Dumb Money Confidence closed Thursday at a level of 89%, exceeding all other days since we began computing this on December 1, 1998. The Backtest Engine tells us that there have been 8 days with a reading of 88%, clustered in April 2010 and December 2019 - January 2020. Over the next 3 months, all 8 days showed a negative return in the S&P 500 of -9% or worse. While momentum has been impressive enough to suggest that any potential weakness should be temporary, sentiment has now reached critical levels that almost universally leads to limited upside that has a strong tendency to reverse over a multi-week to multi-month time frame.