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Too Much Bullishness A Bad Omen?

There’s chatter on the trading floors that a dangerous investor complacency is finally setting in following a stretch where the Dow Jones Industrial Average rose 14 of 17 sessions and climbed to an 18-month high.

The percentage of bullish investors climbed to 48.9 percent today from 46.1 percent the week before, according to a widely followed survey of financial newsletter writers by research firm Investors Intelligence.

This is the highest since the 52 percent reading on Jan. 19, the day that marked the previous 2010 high for the Dow. The average went on to fall more than seven percent before bottoming in early February.

“It is a warning that the risk/reward is getting more dangerous,” said Peter Boockvar, equity strategist at Miller Tabak. Boockvar noted, however, that that this survey is not a perfect timing tool.

The reason why traders follow these sentiment measures as a contrarian indicator is because they figure that if everyone becomes bullish, there’s no one left to buy and propel the market higher. Then, they say, a correction will follow.

For the best market insight, catch 'Fast Money' each night at 5pm ET on CNBC. To play Fast Money’s bracket challenge, go to fastmadness.cnbc.com.

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Trader disclosure: On March 24th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC) (MSFT), (NUE), (BTU); Najarian Owns (BAC) Calls; Najarian Owns (C) Calls; Najarian Owns (CAT) Calls; Najarian Owns (DVN) Calls; Najarian Owns (F) Calls; Najarian Owns (GE) Calls; Najarian Owns (INTC) Calls; Najarian Owns (MCD) Call Spread; Najarian Owns (MOS) Calls; Najarian Owns (RHT) Call Spread; Najarian Owns (YHOO) Call Spread; Terranova Is Short Crude Oil May Futures; Terranova Is Short (CAL), (UAUA), (GS); Terranova Owns (QCOM), (APA), (AMSC); Terranova Owns (GLD) April Puts; Terranova Owns (GS) Puts; Funds Managed By Dennis Gartman Are Short Euro; Stutland Equities Is A Market Maker In VIX And SPX Options; Stutland Owns (TXN)

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