Every quarter we take a look back at the trade ideas institutional brokers have been sending to their clients, in order to figure out what the overall mood of the market is. To do this we analyse the types of ideas being sent and, in particular, the number that are long or short.

Despite all the positive market stories and fresh new highs, if Q4 2012 could be described as cautiously optimistic, Q1 2013 looks a little bit cautious. On a broad scale, the number of new long ideas as a percentage of short ideas was only slightly down on Q1 at 64% vs. 66%. A long percentage of 66% or more is considered bullish, as equity sales desks are recommending two longs for every one short trade. However, while sentiment was consistently rising during Q4, the picture this past quarter is a little bit more jittery.

In late January, early February, when the bull run took a breather, sentiment took a bearish turn, with the long percentage falling from the low 70s to the low 60s. Ahead of Italian elections on 25th February, the markets took a real dip but this seems to have been the catalyst that picked sentiment up again as brokers saw a buying opportunity. That sentiment fell so far, all be it temporarily, could be a sign that brokers don’t expect the up-and-up to continue and are maybe even preparing to catch it on the way down.

Other commentators have also pointed out that that the bulls might be getting nervous . In Marketbeat the other week, Steven Russolillo pointed out that it’s been mainly defensive sectors like Healthcare and Consumer staples leading the way in Q1.

Interestingly, TIM Ideas sentiment shows something a bit different – a nice illustration of how it gives a different perspective on the markets. Although Technology and Materials were two of the two worst performing S&P sector indices, they came out at the top in terms of Q1 sentiment vs. the 2012 average, so the brokers seem to think there’s some value there. We’ll have to wait and see whether everyone else starts thinking the same in Q2.