Investors' sentiment at extreme but stock market decline may not be over

The S&P 500 fell 0.5 percent last week in volatile trading.

It opened the week with a 3 percent plunge on Monday as a weakening renminbi prompted the US to label China a currency manipulator, rebounded on the following three days, then dipped at the end of the week.

Tom Aspray at Forbes wrote that sentiment fell to extreme levels last week. According to the American Association of Individual Investors survey, the percentage of investors who were bullish fell to 21.66 while the percentage who were bearish rose to 48.20, levels last seen before the December lows.

While Aspray acknowledged that the extreme sentiment could be an indicator of a market bottom, he noted that “technical studies...do not yet suggest that a bottom is in place”.

Aspray also noted the plunge in interest rates, with “no signs from the charts that the decline is over yet”.

Christopher Harvey, Wells Fargo Securities’ head of equity strategy, told CNBC that fear over ultra-low US rates and negative rates abroad could spark another deep sell-off.

“If you have a loss of confidence with the rate market, that’s going to spill over into equities,” he said last week.

Nevertheless, Harvey still sees the S&P 500 gaining 6 percent from Friday's close by the end of the year.