Missing: Bullish Investors [3 Must-See Charts]

Trump and Kim Jong Un agree to meet, tariffs might not be as bad as the experts predicted, and the stock market is sneaking back toward its highs as we wrap up the trading week.

What’s not to love?

Unfortunately, some investors are missing the ride. The average stock-watcher has become more bearish on the market since the low-volatility melt up disintegrated last month.

Today, we’re on the hunt for stock market bulls, new IPOs, and a sneaky small-cap rally. Let’s dive right in…

1. The Bulls Back Off

Last year’s incredible market performance landed helped stocks make the leap from the finance section to front-page news for the first time in years.

Of course, sentiment started to shift as bull market awareness spread. Bespoke Investment Group notes that in December, bullish sentiment topped 50% in the American Association of Individual Investors poll for the first time in nearly three years.

But February’s swift correction shook these new bulls out of the tree.

“In this week’s sentiment survey from AAII, bullish sentiment plummeted nearly 11 percentage points falling from 37.28% down to 26.4%,” Bespoke reports. “That’s the lowest weekly reading since the end of August and the largest two-week decline since June 2013.”

Bullish Sentiment

Thanks to 2017’s low-volatility romp, a quick double-digit correction was all we needed to dust off our bear suits. If the market continues its recovery and attacks its January highs over the next few weeks, we could see a powerful momentum move as the sold-out bulls claw their way back into stocks…

2. Return of the IPO?

Thanks in part to the deep pockets of Silicon Valley’s venture cap crowd, the number of significant initial public offerings has dropped in recent years…

US IPO Market

But that might change in 2018.

We’ve seen announcements for some big-name offerings that will hit Wall Street soon, including the popular music streamer Spotify and cloud storage maven Dropbox.

In fact, Renaissance Capital reports that the market has priced 29 IPOs so far this year, an impressive 61% increase from one year ago. Health care offerings are leading the way, with technology not too far behind.

If this trend continues, 2018 could turn into a breakout year for the sleepy IPO market…

3. Small Stocks Grow Up

Small stocks are having a huge week!

Yesterday, I showed you how small-caps have enjoyed a massive bounce after Trump stunned Wall Street with his tariff announcement.

The small-cap Russell 2000’s four-day winning streak just ended yesterday (the Russell consodidated its gains and posted a small loss). The small-cap index has gained almost 4.5% over the past week. For comparison, the S&P 500 has gained just about 2% over the same timeframe.

Russell Recovers

Remember, most pundits were trashing smaller stocks as they took a big hit during the February correction. That’s what makes their quick (and powerful) recovery so impressive. New all-time highs are back in the crosshairs…


Greg Guenthner
for The Daily Reckoning

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Greg Guenthner

Greg Guenthner, CMT, is the editor of The Rude Awakening Pro, The Seven Figure Formula and Profit Spy. Over the past decade, Greg has helped build the small-cap and technical research teams. His analysis has appeared in Forbes, Yahoo Finance, Bankrate, and countless other publications. Greg is a member of the CMT Association and holds the...

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