Bullish and Bearish Sentiment Gridlocked

Given the wide daily swings in the market, I am not surprised this week's sentiment survey by the American Association of Individual Investors shows an equal percentage of bullish and bearish investors: 38.74%. From a contrarian perspective, the sentiment indicator marks a market bottom when individual investors are the least bullish. The low 20% area or a reading in the teen range would be such an area.

Given the market weakness experienced since October of last year and a bullishness reading that has ranged in the 30-40% area, investors do not seem overly bearish. One would think the market would be acting better based solely on these investor sentiment readings. That raises the question about who is doing all the selling. When this period is evaluated at some point in the future, I would not be too surprised if much of the selling has been hedge fund and institutionally driven.

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Source: American Association of Individual Investors