Origins of the terms Bull and Bear
The bull and bear are powerful symbols of the stock market and those participants who are optimistic are described as bullish, whilst those who are pessimistic are described as bearish. The original origins of these terms is not known for sure, however it seems likely that they were derived from the once popular blood sport of pitting a bull against a bear to fight each other.
The Bull and Bear sentiment ratio
The bull and bear ratio is a sentiment indicator published by investors intelligence. Investment advisers are polled on their views on the market and asked as to whether they are bullish or bearish. The bull and bear ratio shows the ratio between the number of bullish advisers to the number of bearish advisers.
The philosophy behind the bull and bear ratio is a contrarian one taking it signals from extremes in market sentiment. Extreme optimism amongst the general public and their advisers accompanies nearly every market top, whilst extreme pessimism almost always occurs at a market bottom.
A high reading on the bull and bear ratio is bearish as there are too many bulls and there is no one left to buy; and low reading on the bull and bear ratio is bullish as everyone has now become bearish and there is no one left to sell. Historically, a bull and bear ratio above 60% signifies extreme optimism, whilst a ratio below 40% signifies extreme pessimism.
The bull and bear ratio is calculated by dividing the number of optimistic advisers by the number of pessimistic advisers, whilst all neutral advisers are left out of the calculation.
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