Goodbye, bull market: This spot-on indicator is saying what you don’t want to hear

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Contrarian investors are confident that a major stock-market top is on the horizon — they just don’t know when. That’s because investor optimism can stay dangerously elevated for months before the bull market breathes its last.

So while there are plenty of signs these days of irrational exuberance in the stock market, contrarians don’t know if the top will occur in the next several weeks, in 2026 — or if it already happened in October, when the S&P 500 SPX hit an all-time closing high at 6,890.89.

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This behavior reminds us that bull-market tops often are relatively gradual affairs that take place over several months. First, a particular sector, industry or stock-selection style hits its top, and then others tumble in succession. In this regard, bull-market tops are not the mirror opposite of bear-market bottoms, which often are characterized by plunging sentiment as the last remaining optimists throw in the towel.

This discussion puts in perspective the elevated levels that the Hulbert Stock Newsletter Sentiment Index (HSNSI) has reached in recent weeks. In more than half the days since the beginning of September, the HSNSI has been in the “extreme optimism” zone (which in previous columns I’ve defined to be higher than 90% of daily readings since 2000). On what so far has been the S&P 500’s year-to-date high, Oct. 28, the HSNSI was at the 99.5 th percentile of its historical distribution. On Nov. 12, the HSNSI was almost as high, at the 99.4 th percentile.

These recent readings represent not just extreme optimism but are bordering on irrational exuberance. That doesn’t mean the bull market will end tomorrow, but it does mean it’s in the vicinity of a top.

The Hulbert Stock Newsletter Sentiment Index is one of four sentiment indexes that my firm calculates. The other three focus on the Nasdaq COMP, gold GC00 and the U.S. domestic bond market. The table below shows how each of these four indexes compare to their historical distribution since 2000.

Among these other sentiment indexes, Nasdaq-focused market timers are not as exuberant as those focusing on the broader U.S. stock market. This is not surprising, given that the Nasdaq has been a poorer performer of late. For the month of November, for example, the Invesco QQQ ETF QQQ lost 2.2%, versus a loss of 0.5% for the SPDR S&P 500 ETF SPY, according to data from investment-research firm Morningstar. If forced to choose between these two ETFs, therefore, a contrarian would choose the Nasdaq over the S&P 500.

You will also notice that market timers are just as exuberant about gold as they are for the broader U.S. stock market. This suggests that from a contrarian point of view, gold also faces significant downside risk over the near term.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at .

More: Three predictions for the U.S. economy in 2026 — and two of them see a recession

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