Market hype triggers ‘new major warning’ sign for stocks

CNBC/Jeff Cox/07-26-17

With a fresh round of record-breaking highs in the stock market has come a surge in investor optimism, and that eventually could create problems.

Bullishness in the most recent Investors Intelligence survey hit 60.2 percent, the highest level since late February. The survey comes from editors of market newsletters and thus provides a snapshot of what professional investors are thinking.

Elevated levels of optimism often coincide with market dips. The last time the II survey hit this level, the S&P 500 proceeded to fall nearly 3 percent.

John Gray, editor at II, cautions that the big spread between bulls and bears, who are at just 16.5 percent, is an indicator of potential danger ahead.

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