After a three-day-long consolidation, the indices are jumping higher Thursday morning on news that China and the U.S. are moving to cancel scheduled tariff increases as they work to complete Phase One of a trade deal.
Progress on trade isn't a huge surprise but there continues to be plenty of folks struggling to keep pace with the market's recent rise. The bears tell us that sentiment is becoming quite extreme but what we don't know is to what degree those bulls still have idle cash they want to put to work.
The problem with using sentiment as a contrary indicator is that it doesn't tell us anything about the level of investment. If there is a high level of bullishness and those bulls are underinvested then the indices are going to go higher. I suspect that that is the dynamic at work at present.
If you are trying to time this market, sentiment is not going to provide much precision. What you need to watch for is selling into strength and an intraday reversal. When stocks stop going up on good news then it will signal that the bulls have deployed their capital and don't have much buying power left.
This is feeling like a combination of a squeeze and "fear of missing out" right now. There may be a very high level of bullishness but those bulls still have plenty of buying power.
I'm working to add some long positions but it is difficult unless you use are using index instruments. This is primarily index-driven action rather than stock-driven strength.