US stock market sentiment is nearing frothy levels. What to watch for

US stock market sentiment might feel frothy because it’s been a one-way TACO trade since Trump backed down on Liberation Day tariffs but most sentiment surveys weren’t overly frothy.

That could be changing.

The AAII survey — which is a solid one — rose in the latest week to 45% bullish from 35.1%. That’s a big jump and reflects a market that’s hitting all-time highs almost daily.

Still, it’s not quite into territory that I would consider frothy, which is above 50%. Last year it peaked in mid-July at 52.7% bullish. You will note that the S&P 500 then fell 9% in less than a month as the market began to worry about job losses and the election. The Fed then came to the rescue and stocks snapped back.

Given where this is, I still wouldn’t say that longs are too crowded to chase but if it rises above 52, then be cautious. Can the S&P 500 get to 6500 first? 7000?

This article was written by Adam Button at www.forexlive.com.