Let’s look at some pictures of what was formerly a totally bombed out market sentiment backdrop.

From Market Harmonics a look at RYDEX fund sentiment, fully recovered from the August freak show.  Notice how volatility has expanded since Central Banks started becoming more aggressively intertwined with markets since 2011?  Hmm?

From Doctor Ed by way of Investors Intelligence, a look at the II (newsletter writer sentiment) as of October 20, a couple days before Amazon, Alphabet and Mr. Softie launched the good times, good feelings and presumably the need for the newsletter boyz to adjust to being ‘right’ with the market. As we noted in #366 this week the bulls were recovering nicely but the bears got a little too eager too soon, holding the ratio down.

From Sentimentrader, a view of pessimism all gone.  But optimism is normal and not extreme.

In line with that thinking is the Smart/Dumb money alignment, heading in a contrarian bearish direction but not yet extreme.  Look how beautifully Dumb money has aped the price movements of the S&P 500.

All in all, I’d say sentiment is on its way to signaling the next negative reaction in stocks.  When that reaction comes about (I think the markets pop to at least the SPX 2100 target first) it will be time to evaluate the favored plan (strong correction resumption) vs. the less favored but viable one (upside breakout, increasing mania and a world full of market participants, casino patrons, black boxes, algos and substance abusers off to giddy new heights).