Sentiment Signal Suggests Increase Chance of a Pullback

• After prior instances of bullish sentiment exceeding 60%, the SPX averaged just 2.32% over six months versus the typical 4.25% return, with positive outcomes dropping from 69% to 59%.
• When the bullish signal occurred within 1% of all-time highs (10 of 22 cases), SPX returns were negative over one and three months, with six-month and one-year gains of only 1.84% and 2.06% respectively.
• Historical data shows SPX performs best when bullish sentiment is 30% or below, averaging 11%+ returns with 75% positive outcomes, versus 5.19% returns when bulls exceed 60%.

Summary

Key Signal: The Investors Intelligence (II) poll shows bullish sentiment surpassing 60% for the first time since late 2024, triggering a contrarian warning signal for potential market weakness ahead.

Historical Performance Data:

• Analysis covers 22 prior occurrences since 1965 when bullish sentiment crossed above 60% after at least six months below that threshold
• Following these signals, the S&P 500 (SPX) averaged just 2.32% returns over six months (vs. typical 4.25%) with 59% positive outcomes (vs. normal 69%)
• One-year returns averaged 4.84% compared to the typical 8.59%

Most Concerning Scenario:

When bullish sentiment exceeds 60% while the SPX trades within 1% of all-time highs (10 of 22 historical cases), returns were notably weaker:

• Negative average returns over one and three months
• Six-month returns of only 1.84%
• Twelve-month returns of just 2.06%

Current Context:

The latest signal occurred January 28, 2026, with the SPX near record highs after nine consecutive months of fresh records. The index has been consistently reaching new all-time highs during this period.

Contrarian Indicator Performance:

Historical data shows inverse correlation between bullish sentiment and future returns. When bulls exceed 60%, SPX averaged 5.19% one-year returns. Conversely, when bullish sentiment falls below 30%, average returns exceeded 11% with 75%+ positive outcomes.

Market Implication: The elevated bullish sentiment combined with proximity to all-time highs suggests increased probability of a near-term market pullback, according to this historically reliable contrarian indicator.