Well, Now It's All Over: Bulls Stampede Across Newsstands

Magazine editors are notorious for calling tops and bottoms with their Wall Street covers, so the recent trend gives pause.
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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

Barron'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

Olde English

and a bottle of

Nyquil

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

Mr. Hooper

has any left, you might still be able to pick up a copy of last week's

Business Week

, whose cover boasts a tough-looking bovine character and the question, "A WISER BULL?"

Barron's cover

Source: Barron's

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

Legg Mason

, 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

Business Week

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

Newsweek

, it's not news." Indeed, Montgomery turned out to be correct when he told

TheStreet.com

readers

last fall that

Newsweek's

"The Crash of '99?" cover in October was the sign to buy.

Bulls on the covers of

Business Week

and

Barron's

are disturbing, but they are not an all-out sell signal. "

Business Week

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

Time

and

Newsweek

are probably just itching to call a top.