One of the most adamant and unapologetic gold bulls for the past few years has been and continues to be David Rosenberg of Gluskin Sheff. Recently Rosenberg opined that gold could even rise to +$2000 levels:

While a relatively rare pattern, it is one of the most reliable because no trend can accelerate geometrically to no end. Instead, the end result is an exhaustion and a total collapse and unwinding of the trend.

Sentiment Surveys
The AAII’s bulls fell slightly and bears rose by 10% points so each camp reach exactly 42%. Surprisingly, including this instance, the AAII weekly survey has spent 39 weeks at parity - that’s 3.3% of the time, since the survey was started in 1987. Here is an updated chart of the AAII bull ratio which I first showed when the there was a sudden jump in bearishness in early November (parity in this chart is at 50%):

The comparison between the two countries and situations is made in a recent report from Societe Generale titled “Worst Case Debt Scenario“. Both Japan and the US share:

Sentiment Surveys
The AAII weekly survey of retail US investors shows they continue to return to complacency from the extremely pessimistic stance earlier this month. This week the bulls continue to rise, gaining 4% points to 43% while the bears decline 7% points to 32%. The bull ratio is 57% - in line with the long term average. For a chart, check previous link.

Now another pair of strategists have taken sides - although not as personal as Rogers and Roubini. Dennis Gartman, believes not only that gold is in a bubble, but that it should be obvious to everyone. But that doesn’t mean he’s necessarily climbing off the trend:

AAII
After last week’s sudden stampede to an extremely gloomy stance, the weekly survey of retail investors by the American Association of Individual Investors is showing a dramatic realignment to perfectly neutral. The bears and bulls both stand at 39% after a -/+17% percentage point change.

Source: Chart of the Day

When the Dow broke 10,000 (for the nth time) in the middle of last month, I cautioned that stocks had risen into thin air (again). The S&P 500 meandered around 1090 for a few days and then fell back.

The most recent sentiment overview shows an amazing turn of events. Even as the stock market has gone on to rise almost 60% from its dark depth 8 months ago, a moderate correction was enough to plunge the majority of retail investors into a new state of capitulation.

Sentiment Surveys
The star this week is the ever so humble and common AAII weekly survey of US retail investors. This sentiment indicator sends extreme signals every once in a blue moon. So I guess you better check the night sky tonight because we haven’t seen so few bulls in this survey in a long time.

But what if we step back from the raging and weeping talking heads on TV and instead of opinions, we just look at the facts?

Lowry measures this through their proprietary metric called (what else?) Selling Pressure. It remains low and falling, helping to support the thesis of a healthy market rally. According to Paul Desmond: “Every major market top in Lowry’s 76-year history has been preceded by a sustained rise in selling pressure. With selling pressure recording a new 12-month low within the past two weeks, no such rise is now evident.”

AAII Survey
This week’s survey of US retail sentiment by the Association of American Individual Investors came in at 34% bullish (a drop of 7% points from last week) and an increase of bears to 42% (a 6% point increase). While the increased fear is normal after the kind of week we had, the ratio of the two remains neutral. Had the response been either muted or exaggerated, it would have been more interesting. At this point, it doesn’t really offer any edge.

While it will take a few days for the whole report to be dissected, it is more likely that it was an excused used to run up prices, rather than the actual rationale. Especially since many have pointed out reasons at the beginning of the third quarter why the recession may be over. I attribute the bounce today to the extremely oversold breadth - in the very short term.

So now that the US economy is still on the ropes, fighting for its very survival and in dire need of a liquidity transfusion of its own via the credit markets, where are the banks?

Investors Intelligence
This week the ChartCraft measure of stock newsletter editors sentiment was little changed from last week: 49.5% bullish and 23.1% bearish. That’s another week where twice as many are optimistic that the stock market will continue to rise. A remarkable long string of weeks but so far they have been correct.

But this year was atypical in that we had a spectacular rally early in the year. In fact, this was arguably the most hated rally since very few purportedly believed in it or predicted it. And yet it happened. In any case, seasonality patterns should not be confused with blueprints. They are merely loose fitting guides to be draped over price action. The stock market certainly does not heed them every cycle.

Dow 10,000
Yes, the Dow Jones reached and surpassed the magically round number 10,000. But in case you were too busy to count, this is for the 26th time it has done so in the past 10 years. So that means we’ve had about 10 years of zero returns (excluding dividends and inflation). Those specialty party hats the NYSE hands out are well worn by now and no one really knows what we’re supposed to be celebrating.