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Extreme Bullish Sentiment Can Be Bearish

ByThierry Laduguie
Published 11/11/2021, 11:00
Updated 17/03/2024, 07:38

Sometimes there is enough evidence to suggest the stock market will decline. Last week, despite an extremely bullish S&P 500, there was a high probability the S&P 500 would decline. That is the irony, you see the S&P 500 rallying day after day and you are scared to sell it. Yet history shows that it is when sentiment is extremely bullish and the Elliott wave pattern is complete that the stock market will decline.

Last week I saw an increasing number of people calling for 5000 on S&P 500, this was an indication sentiment was extremely bullish and the bears threw in the towell. So I sold the S&P 500. Despite all the excitement, the Elliott wave pattern was bearish and the index was just below a long term resistance line see below.

So far the signal is working, the S&P 500 is declining, it could be the start of a long decline. If you missed the decline I would not worry too much, there is a good chance the index will rebound near 4700, this will provide another opportunity to sell. But a break above the resistance line would cancel the bearish scenario.


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