b/b ratio-sp500(6/10)

Over the past few weeks there has been a gradually increase in pessimism among investors as the Put to Call Ratio has been well above the 1.0 level while the Volatility Index (VIX) has risen substantially as well.  One indicator that has been useful in signaling a meaningful bottom during the past several years has been the % difference between the Bullish and Bearish Investment Advisors.  In the past when the % of Bearish Investment Advisors has equaled or exceeded the % of Bullish Investment Advisors the market has made a bottom which was then followed by a substantial rally.  The last time the % of Bearish Investment Advisors exceeded the % of Bullish Investment Advisors was in the Fall of 2002 (point G) as the S&P 500 made a bottom (point H) which was then followed by a substantial rally (points H to I) in which it gained over 40% during the next 18 months.  Meanwhile as you can see below it's very rare to see the % of Bearish Advisors greater than the % of Bullish Investment Advisors (points J) however when it does occur the S&P 500 has rallied strongly in the past (points K to L). 

Currently the % of Bullish Investment Advisors is higher than the % of Bearish Investment Advisors by around 10%.  However it will be interesting to watch this over the next 2 to 4 weeks to see if the % of Bearish Investment Advisors eventually outnumbers the % of Bullish Investment Advisors.  

I know the past five weeks has been frustrating to many investors however now isn't the time to panic and give up on the market.  Corrections are always going to happen and generally clear the way for a new group of stocks to emerge as market leaders once a bottom does occur.  Right now just be patient and keep a close eye on those stocks which are holding up the best and developing a favorable chart pattern.
maxiam b/b ratio since 1987: -10. big bottom in bear mkt: a, b/b near or below 0; vix: above 40, near 60; put/call(21ema) near 0.8. mkt index will rally near 20-30% in next a few weeks(1-3months) after this kind of bottom no matter in bear or bull mkt.