Investor Sentiment Shows Improvement

When gauging investor sentiment, the two most popular surveys that track bullish sentiment are the polls conducted by Investors Intelligence of newsletter writers and the American Association of Individual Investors (AAII) survey of its members. As shown below, both measures have shown improvement in recent weeks and have broken their downtrends of the last several months.

Given that investor sentiment is typically a contrarian indicator, high readings of bullishness are generally considered negative for the market. However, with current bullish sentiment readings below 50%, these are hardly levels that can be considered extreme.

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Comments

[mkreisel:]

Looks like a top to me.

Jan 09 10:53 PM

[BrucePile:]

It's in the pre-selloff zone (45%-55%) where it tipped off the dives at October '07, May '08, and September, '08. If you compare the AAII chart with the S&P above it, and consider the slowly rising wedge formation bearish in the context of a bear decline, you see these formations leading up to each of these major downlegs. We are currently near the end of yet another of these formations.

All this would indicate another major selloff next. But at some point, there will be a reversal of this continuing pattern (it can't go to zero) and a sharp multi-month rally occurs. But will it be from here or from lower? One of the things I am watching is which way that wedge formation breaks.

Jan 10 12:12 PM

[mkreisel:]

Well, I was quite right on the mark in my previous post.

Who's the idiot that gave the one "thumb down"?

Jan 15 01:25 AM