Cash as a percentage of mutual fund portfolios was still rising. Stock mutual fund inflows were slowing. Margin debt was the lowest of the year. Short interest was climbing. Now, investor expectations are getting pretty darn optimistic in the wake of this month's rally.
Sentiment always lags the market and now is no exception.
First we had the rally, which we have suggested you trade rather than invest in. Now, we're seeing investors' spirits pick up. Mid-month mutual fund outflows have turned into inflows in the past 10 days. The pros are increasingly worried about underperforming, so they're leaping into stocks they eschewed at lower prices. And the media are doing their level best to reinforce the happy feeling.