Sentiment extremes for certain sectors
The stock market's rally has pushed sentiment to an extreme among the tech and health care sectors. For example, IBB Optix's 20 day average is extremely high at 76:
*IBB = biotech
Such extreme optimism has only been matched 1 other time in history:
While it wasn't necessarily an immediately bearish sign for biotech, IBB did trend sideways for the next several months:
Meanwhile, XLV Optix's 20 day average is almost at a record high at 75:
That historical case led to more short term gains before healthcare stocks tanked:
And XOP Optix's 20 day average is also extremely high at 75:
Such excessive short term optimism towards oil producers usually led to a pullback:
From a medium term perspective, our Smart Money / Dumb Money Confidence Spread has fallen below 0.25 - our deemed level for "excessive pessimism" - for the first time in more than 40 days:
When long streaks of medium term pessimism ended in the past, the S&P 500 rallied over the next year:
And finally, the U.S. Economic Policy Uncertainty Index continues to make new all-time highs:
Extremely high readings in the past usually led to more gains for stocks over the next 6-12 months.