$NDX Daily Sentiment at 94, among the 8 most extreme days since 2009 (11 years).
Three months ago, this was at 4.
Few days ever reached this high level – odds are growing for a sharp correction into Q3, magnitude to be determined. pic.twitter.com/I98cqsFXmM
— Macro Charts (@MacroCharts) June 10, 2020
Today’s Chart of the Day was shared on Twitter by Macro Charts (@MacroCharts). It’s a chart of the Nasdaq since the 2009 low, along with the Daily Sentiment Indicator in blue. Bulls celebrated a major milestone today, as the Nasdaq closed above 10,000 for the first time ever. The Index has surged over 45% from the March low, just 11 weeks ago. Breadth and momentum have been healthy and suggest that we’re in the early innings of a new bull market. At the same time, short-term sentiment indicators have been flashing warning signs of excessive optimism among market participants. Macro Charts points out that the Daily Sentiment Index has reached an extreme high of 94. Some sort of short-term pullback has followed all eight spikes above 93 in the past 11 years. This doesn’t mean stocks have to come crashing down as they did in February. But it does increase the likelihood of a pullback in the near-term.