“If you need an indicator to tell you whether sentiment is extreme, it’s not.”
-Walter Deemer

 

The best measure of extreme sentiment is price.  And a good measure of price extremity is the amount of time required for price to double.  Despite bubble talk, today’s leading sector – technology – has accelerated at a modest pace versus prior examples (Table 1).  The flagship technology ETF, QQQ, would need to jump 35% overnight to match the most tepid of prior manias.

Yes, I know, Bitcoin just doubled in one month’s time.  But we’re examining the stock market.  Bitcoin is not a stock, let alone a sector.  And it has nowhere near the volume or public reach, at least not yet.  (Prove it to yourself.  Do you know anyone who holds Bitcoin in their retirement account?)

Let’s be clear.  The stock market may be approaching some sort of top.  But it’s not exhibiting bubble characteristics comparable to major tops of the past two decades.  The raciest sector appears to be exhibiting normal leadership, not a bubble profile.

Table 1. How hot is hot?