Anyone who thinks all the good vibes on Wall Street are some kind of secret need only go as far as the newsstand to see how wrong they are.
The cover of this week's
is a picture of a bull (shorthorn?), complete with steam coming out of its nostrils. There it is -- for anyone buying a few Lotto tickets, a 40-ounce of
and a bottle of
to see. Nearby, there's a copy of the
New York Post
, with its dead-on shot of the bronze bull at Bowling Green. Caption: "DOW WOW!" And if
has any left, you might still be able to pick up a copy of last week's
, whose cover boasts a tough-looking bovine character and the question, "A WISER BULL?"
A bull market is a wonderful thing, but when everybody in the world knows about it, you've got to wonder. Paul Macrae Montgomery, market analyst at
, has taken a look at magazine covers going back to 1923 and has found that they work well as a contrary indicator. Perhaps the classic example was the bearish cover of
on Aug. 13, 1979 -- "The Death of Equities" -- when the
Dow Jones Industrial Average
was at 875.26. In fact, the cover marked not a death but a resurrection.
This shouldn't come as a surprise, says Montgomery. As with any sentiment indicator, the idea behind watching magazine covers is that once the good news is in the market, it's not going to take stocks any higher. "No matter how good your information is, or how accurate your information is, if it is already widely shared, it's already had its impact," explains Montgomery.
It's not just magazine covers that are pointing to a surfeit of good vibes out there. Sentiment polls "are showing relatively high optimism," says sentiment watcher Tim Hayes, senior equity strategist at
Ned Davis Research
in Nokomis, Fla., who has also noticed the bovine turn news covers have taken lately. "Anecdotally, it certainly feels like there's a lot of optimism."
Time to head for the hills? Not necessarily, says Montgomery. "What's really significant is when a nonbusiness publication will pick up and publish a bull or a bear. Once you have a bear on the cover of
, it's not news." Indeed, Montgomery turned out to be correct when he told
last fall that
"The Crash of '99?" cover in October was the sign to buy.
Bulls on the covers of
are disturbing, but they are not an all-out sell signal. "
covers have had some great signals, but they have a business cover every week, so they have a lot of noise," Montgomery says.
But be forewarned: After watching the Dow jump from 10,000 to 11,000 in just 24 trading days, our friends at
are probably just itching to call a top.