Stock market optimism among professional investors just keeps on surging, and is now at the highest levels since before the crash of 1987.
Bullishness, or the belief that the market is heading higher, is now at 66.7 percent in the latest Investors Intelligence survey, a widely followed gauge of sentiment among investment newsletter authors.
That's the highest level since early April 1986 — a potential warning sign that the rush into equities is getting overdone. After all, a year after the bulls had reached this level came the infamous Black Monday crash that sent the Dow Jones industrials down nearly 22 percent in a single day.
"Sentiment readings have roughly followed their 1986/87 pattern. Then the bulls peaked with initial market highs early that year and they returned to above 60% levels months later after more index records," John Gray, editor of the Investors Intelligence weekly report, said in the latest issue Wednesday.
"In 1987 stocks crashed a few months after that. A repeat of that scenario suggests potential danger, especially as the market moves become parabolic," he added. "Those recently holding cash appear to be chasing a rallying market, adding fuel to the fire."
Indeed, the II survey reflects other gauges that show stock market fever is reaching levels not seen in years.