an element of caution to be applied to markets in the near term?

Below is an interesting chart from the National Association of Active Investment Managers (NAAIM) which as you can see over the last few years has proved to be a good indicator as to where the S&P 500 is likely to go in the short – medium term (1 – 3 months) and that, for spreadbettors and CFD traders could be a useful trading indicator. Eseentially it is a measure of the percent of bulls v bears on the market outlook, for example a reading of 80 means there are 80% more bulls than bears.

You can see below that readings above 70 have been good warning lights for a sharp pull back whilst readings below 30 seem to have a 100% hit rate with regards to impending market rallies of decent magnitudes too. We are not yet at the 70 level but it is notable that we jumped in the past month from 30 (and a rally thereof of 5%) to just over 60 – something to keep an eye on…