Sentiment is the most stretched since January

The spread between Smart Money and Dumb Money Confidence has eroded to -62%, one of the widest since we began tabulating this in 1999. According to the Backtest Engine, a spread this wide led to a negative average return over the next 2-3 months. More notably, out of the 151 days that had a spread this wide, only 17 of them, or 11% of the days, managed to escape with no losses on any time frame. Once late buyers see prices start to wobble, the typical reaction is a pullback of 3% - 8%.