Bullishness is running at an eight-month high among professional investors, triggering a "major worry" that the stock market is setting up for a pullback, according to a new sentiment survey.
Those believing the stock market is heading higher hit 59.5 percent in the most recent Investors Intelligence reading, which polls newsletter editors. That high level of confidence contrasted with just 14.1 percent of those in the bearish camp that believe the market is heading lower.
The 45.4 percentage point difference between the two readings is equal to where it was in early June 2014 and above the levels of December and mid-November that signaled near-term market tops. Bullishness rose from 56.6 percent during a period in which the S&P 500 gained 0.6 percent; the index is up 5.9 percent in February.
"A major worry is now signaled from the spread between the bulls and bears," John Gray at Investors Intelligence said in a narrative accompanying the survey.
In addition to the gaping divide between bulls and bears, those predicting a looming correction, or 10 percent market drop, fell from 29.3 percent a week ago to 26.4 percent, which is a 2015 low.
Gray cited several comments showing how strong the conviction is for the bulls:
From "The Chartist," by Dan Sullivan and Steve Mais: "The current technical evidence continues to suggest that what we have here is a market that simply does not want to go down."
From James Flanagan's "Past Present Futures": "All those who fretted about deflation and ran to bonds look like they have been snookered. They are having to deal with the reality of a stock market which has dismissed the significance of the deflation and the European dilemma and advanced to new highs."
Though they are in the minority, there was this representative view from a bear—Brad Lamensdorf, who edits the "LMTR Newsletter": "From a historical perspective, equity markets are exceedingly expensive. ... While stocks may appear cheap relative to bond yields, this too is manipulated as governments have distorted yields. In our opinion, when the market turns downward its force will be swift. We continue to maintain our 50 percent short position, which was established on December 15, 2014."