Signs of Excessive Bullish Sentiment

by Tom McClellan
Financial Sense

I like to watch the data on the number of shares outstanding in certain select ETFs, and one of the best for this purpose is the biggest one, SPY. It tracks the SP500, and it currently has $196 billion invested in it. So it is a big deal.

The number of shares outstanding fluctuates with investor interest in the stock market. As more people start buying shares, the share price can start moving ahead of the net asset value (NAV), and so the sponsoring firm issues more shares, thereby keeping the share price and NAV as close as possible. Likewise, when investors start selling, shares get redeemed. And in the process, we can get insights about investor sentiment when this data on shares outstanding gets to an extreme value.

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