http://www.hussmanfunds.com/wmc/wmc100906.htm Bearishness without nervousness An important part of last week's advance appeared to be a simple "clearing" of the a short-term oversold condition in prices and bearish sentiment. While the recent increase in bearish sentiment might have deserved something of a "clearing rally," it is notable that we're observing what might be called bearishness without nervousness. The chart below presents the Investors Intelligence bearish percentage versus the CBOE volatility index (VIX), which is often viewed as a "fear gauge" for the stock market. Historically, increases in the level of bearishness early in a market downturn are often both accurate and persistent, as we observed all through 2008 and in many past market cycles. It's difficult to look at the evidence and conclude that investors are excessively bearish, much less terrified here.
