Newsletter Sentiment Analysis: 32 Stocks Signal Potential Bull Market Exhaustion

The MarketWatch analysis published on February 12, 2026, presents a contrarian indicator based on investment newsletter sentiment that warrants careful consideration by market participants. Author Mark Hulbert of Hulbert Ratings employs a methodology that has been validated across multiple market cycles since 1970, identifying specific sector rotation patterns that historically precede market peaks [1]. The identification of 32 stocks currently favored by top-performing newsletters—concentrated heavily in Financial Services, Healthcare, and Technology—coincides with observable market weakness in cyclical sectors and strength in defensive areas, creating a concerning technical and sentiment picture that suggests elevated risk for equity positions.

The newsletter sentiment analysis methodology employed in this report follows a systematic process developed and refined over decades of market observation. The framework begins by identifying the three sectors most-endorsed by top-performing investment newsletters, measured by the concentration of buy recommendations across a universe of monitored publications. The current reading shows Financials receiving the strongest endorsement with 17 stocks recommended, followed by Health Care with 7 stocks, and Information Technology with 8 stocks [1]. This concentration pattern forms the foundation of the bearish signal.

The historical analysis relies on Ned Davis Research data spanning over five decades, examining the sector rankings during the last three months of all bull markets since 1970 [1]. The consistent finding across this extended historical sample is that Utilities, Energy, and Communication Services systematically underperform during the final phase of bull market expansions. Currently, these same three sectors receive the fewest newsletter endorsements, creating an alignment between current sentiment patterns and historical peak-period dynamics. The author interprets this correspondence as a contrarian warning sign, suggesting that market participants may be overexposed to sectors that historically lead into peaks and underexposed to sectors that subsequently outperform during market transitions.

While the historical framework provides valuable context, several methodological limitations merit acknowledgment. The article does not specify the exact quantitative threshold required to generate a signal, making statistical significance assessment challenging. Additionally, the historical track record of this specific indicator during actual market transitions remains unquantified in the available analysis. The methodology also does not incorporate current macroeconomic variables such as interest rate trajectories, GDP growth trends, or employment data that might differentiate the current environment from historical peak periods.

The article’s publication occurs against a backdrop of mixed but historically significant market dynamics. Over the trailing 30 trading days, the major indices have exhibited notable divergence that provides important context for the sentiment analysis [0]. The S&P 500 has advanced 0.59%, moving from approximately $6,900 to $6,941, remaining within 1% of all-time highs established near the $7,002 level [0]. The Dow Jones Industrial Average has demonstrated stronger momentum, gaining 3.48% and crossing the psychologically significant 50,000 threshold, reaching approximately $50,121 [0]. The Russell 2000 small-cap index has shown the strongest relative performance among major indices, advancing 5.94% to approximately $2,669 [0].

The technology-heavy NASDAQ Composite presents a notably weaker picture, declining 1.70% from approximately $23,466 to $23,067 over the same period, with the index retreating from its recent peak near $23,988 [0]. This divergence between the broader market indices and the technology sector is particularly significant given that Information Technology ranks among the three most-recommended sectors by newsletters. The internal weakness in tech leadership, combined with strength in defensive areas, creates a technical picture that aligns with the bearish sentiment thesis.

The sector performance data over the trailing 30 days reveals a rotation pattern consistent with late-cycle market dynamics and the historical patterns described in the article [0]. The worst-performing sector has been Financial Services, declining 2.26%, followed by Industrials at 1.41% and Technology at 0.95% [0]. Notably, Financial Services represents one of the three sectors most-endorsed by newsletters, creating a concerning disconnect between bullish recommendations and actual performance.

Conversely, defensive sectors have demonstrated resilience during this period. Basic Materials has gained 1.77%, Communication Services has advanced 1.58%, Healthcare has risen 0.92%, Consumer Defensive has added 0.91%, and Utilities has shown a modest gain of 0.25% [0]. This rotation into defensive sectors—particularly the outperformance of Utilities, which historically underperforms at market peaks—creates a complex interpretation challenge. If the historical pattern holds that Utilities underperforms during the final three months of bull markets, the current outperformance of this sector might alternatively suggest the market transition has not yet fully materialized.

Real-time data for stocks prominently featured among the 32 most-recommended securities provides additional context for the sentiment analysis [0]. Microsoft (MSFT), trading at $404.37 with a P/E ratio of 25.34, declined 2.15% on the publication date, well below its 52-week peak near $555 [0]. JPMorgan Chase (JPM), priced at $310.82 with a P/E of 15.52, fell 2.33% despite trading near 52-week highs [0]. These price movements in heavily-recommended stocks demonstrate immediate sell pressure that may reflect profit-taking or shifting sentiment among market participants.

In contrast, Apple (AAPL) at $275.50 with a P/E of 34.83 gained 0.67%, trading near 52-week highs [0]. NVIDIA (NVDA) at $190.00 with an elevated P/E of 47.15 advanced 0.78%, also maintaining proximity to 52-week highs [0]. Johnson & Johnson (JNJ) at $240.86 with a P/E of 21.84 gained 1.05% and reached 52-week highs [0]. Exxon Mobil (XOM), despite the sector’s underperformance in newsletter rankings, traded at $155.62 with a P/E of 23.23 and gained 2.66%, also at 52-week highs [0]. The mixed performance among the highlighted stocks underscores the challenges of applying sector-level sentiment indicators to individual security selection.

Several technical and sentiment factors align with the historical pattern identification in the article. The internal weakness in the NASDAQ, declining while the S&P 500 edges higher, suggests underlying market stress not captured by headline indices. The concentration of bullish recommendations in Financials and Technology—sectors currently underperforming—represents a form of market consensus that historically precedes corrections. The Dow Jones crossing 50,000, while historically significant, has historically occurred during periods of elevated market exuberance that subsequently resolved lower.

The contrarian interpretation of newsletter sentiment carries particular weight in this context. When top-performing newsletters converge on similar sector exposures, their recommendations often reflect delayed recognition of trends rather than anticipatory positioning. The historical pattern of Utilities, Energy, and Communication Services underperforming at market peaks, combined with current under-recommendation of these sectors, creates a potentially self-fulfilling dynamic where insufficient capital flows to areas that may outperform during transitions.

Countervailing factors warrant equal consideration in any balanced assessment. The S&P 500 remains within 1% of all-time highs, demonstrating sustained buying interest despite observable sector rotation [0]. The Dow Jones continues establishing new record highs, a development inconsistent with imminent market peaks in historical contexts. Strong January employment data, with 130,000 jobs added, suggests ongoing economic resilience that could extend the current cycle beyond historical norms [2].

Structural changes in market composition and behavior since 1970 may also render historical patterns less applicable. The dominance of passive investing and index funds has fundamentally altered capital flows compared to the period used for historical validation. The ongoing artificial intelligence deployment cycle may represent a structural productivity transformation not captured in historical bull market patterns. The significant composition changes in the S&P 500, with technology and financials representing substantially larger index weights than in 1970, further complicate direct historical comparisons.

The newsletter sentiment analysis presents a historically-grounded warning signal that merits monitoring but should not be interpreted as definitive market timing guidance. The 32 stocks currently favored by top-performing newsletters—concentrated in Financials, Healthcare, and Technology—represent the sectors most-endorsed by monitored publications, while historically weak-at-peak sectors (Utilities, Energy, Communication Services) receive the fewest recommendations [1]. Current market data shows defensive sectors outperforming cyclical sectors, consistent with late-cycle dynamics, while the NASDAQ’s weakness amid S&P 500 strength suggests internal market deterioration [0].

The historical framework employed by Hulbert Ratings has demonstrated consistency across multiple bull market cycles since 1970, providing a defensible analytical foundation. However, structural changes in market dynamics, the absence of specific quantitative thresholds in the current signal, and the absence of macroeconomic overlays limit the predictive reliability of this indicator in isolation. Market participants should consider this sentiment analysis alongside technical, fundamental, and macroeconomic indicators rather than as a standalone positioning mechanism.

The analysis reveals elevated risk factors that warrant attention from market participants. The alignment between current newsletter sentiment and historical peak-period patterns creates a probabilistic concern about near-term market direction. Observable sector rotation into defensive areas while Financial Services and Technology—the most-recommended sectors—underperform suggests potential positioning risk. The divergence between the NASDAQ’s technical weakness and the S&P 500’s strength indicates internal market deterioration that historically precedes corrections.

From a contrarian perspective, the current environment may present opportunities in historically underperforming sectors. Utilities, Energy, and Communication Services, currently the least-recommended sectors according to newsletter sentiment, may represent areas of relative value if the historical pattern of late-cycle outperformance holds. Small-cap stocks, as evidenced by the Russell 2000’s 5.94% 30-day gain, demonstrate continued risk appetite that may persist if economic growth remains robust.

The sentiment indicator appears most relevant for near-term positioning decisions, with the historical pattern specifically referencing the final three months of bull market periods. Market participants with shorter time horizons should weight this indicator more heavily, while those with longer investment horizons may appropriately discount its significance. The absence of specific timing guidance in the article limits its utility for tactical positioning without additional analytical overlays.

The MarketWatch newsletter sentiment analysis presents a historically-validated contrarian indicator suggesting potential market exhaustion. The identification of 32 stocks favored by top-performing newsletters, concentrated in Financials, Healthcare, and Technology, combined with observable defensive sector outperformance and technology weakness, creates a technical picture consistent with late-cycle market dynamics [1]. However, the current strength in major indices, robust economic data, and structural changes in market dynamics introduce material uncertainty about the reliability of historical patterns in the current environment.

Market participants should approach this analysis as one input among many rather than as definitive positioning guidance. The historical consistency of the sector rotation pattern provides valuable context for risk assessment, but the absence of specific quantitative thresholds, macroeconomic overlays, and timing guidance limits its standalone utility. A balanced approach would maintain awareness of the identified risk factors while remaining responsive to ongoing market developments that may either confirm or contradict the bearish sentiment thesis.