AAII Bearish Sentiment at Highest Level Since March

The first meaningful pullback since the March lows has brought the bears out of the woods. According to the weekly poll from the American Association of Individual Investors (AAII), bearish sentiment is currently at 54.65%, which is higher than any other point since March 5th.

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Comments

[tobi:]

Take that as a contra indicator or go short, that's the real issue ? Honestly, I have no clue

Jul 09 04:34 PM

[Larry House:]

It might be a good time to pick out a couple of trades for a short-term bounce in the market--with a tight stop loss.

Jul 09 04:45 PM

[richjoy403:]

OK, that is a data point...but is it cause, or coincident?

I expected Bespoke to be more helpful.

Jul 09 04:51 PM

[PseudonymName:]

I do not trust these numbers. The last time Bespoke reported these numbers they were exactly oppsite of the numbers reported here:

www.market-harmonics.c...

Jul 09 05:13 PM

[tobi:]

Well, honestly, what catalyst could drive the market higher short term ? The only thing I can think of are the bank earnings next week being cooked and lie spiced just fine. Other than that, I have the pestering feeling we have a downside bomb ticking somewhere and we just can't see it yet. I personally am amazed at how little the market seems to care that california (and other states on it's tail) is in a not ending budget stress and getting downgraded almost on a week to week basis.

Jul 09 05:22 PM

[whidbey:]

Not surprised. The general deterioration in sentiment is just the precursor to large move sometime this summer or fall. The sentiment is responding to the perception that the Administration is not only not in control, but has not got a clue about what is happening in the economy has it prepares another bag of candy for the chumps.

Jul 09 06:01 PM

[fleeing omega:]

tobi,
i am with you. the bombs keep going off and not only that, they get bigger. it is a chain reaction sweeping through a sea of loose lending that built up over decades. flame-up started in mortgages and spread from there. now the disease has been passed to the gov't who evidently thought they could handle it. i fear it won't blow over until the underlying combustibles are entirely spent. here is where we are in this slow motion challenger disaster: the governent tries to paper over the current debacle with so much more debt that things seem peaceful and calm, but that is all the more reason to be nervous because it will only come back with compound fury. suddenly it will again becomes obvious that the debt explosion cannot be wished away.

right now california is bust, sustained levels of high unemployment is pushing other state governments towards insolvency, ARMs and commercial real estate are ticking away madly, etc. the commodities surge that helped the green shoots rally seems to be winding down as the china stimulus gets spent. people are watching the stock market for the next move but treasuries keep flashing warning lights, IMF is on alert for the next nation to default, and china is looking more like a reinflation bubble by the day.

government says "recovery" but everything they actually do says "hang on to your a$$".

of course i could be making all this up...

Jul 10 01:00 AM

[cameroni:]

There is plenty of time for another rally before the big one. We should be cautious but not get too involved yet in the belief that lows will be retested this summer. The cycle is predictable and overdue now with a little downturn. It has to be convincing enough to encourage more buyers to think they are getting in at the lows and yet not so severe that that panic and run for cover.

Markets will oscillate with a general downtrend until early August at the latest. Flat-line for a period and then become decidedly bullish after mid August. I think we can expect another sharp rise until October/November......and then......

Good luck.

Jul 10 03:05 AM

[mkreisel:]

If you really dig hard into the AAII Sentiment data, you will find out that it is NOT a contrarian indicator.

In fact, it's not an useful indicator at all.

Jul 10 03:23 AM

[YoYoMama:]

Another SA contributor posted the AAII weekly sentiment indicator. I posted that it will be interesting to see if the bears actually agree.

It's just as I suspected.

When AAII sentiment is bullish, AAII is of course wrong and it's a contrarian indicator. When AAII sentiment is bearish, AAII is begrudgingly right or irrelevent.

How typical.

Jul 10 09:14 AM

[John Lounsbury:]

The numbers you refer to are the Investors Intelligence survey of investment advisors. The Bespoke numbers are for the AAII suvey of retail investors who are AAII members. At times the two surveys show different relative results. Both are considered to provide contrary indicators for stocks, but the track records are not uniform - neither can be considered a fool-proof indicator, just useful information. If you look at the recent record for AAII, peaks in bearish sentiment would have indicated August, October and November, 2008 and early January, 2009 as buying opportunities, which they weren't if you looked at markets three months later. Only the early March, 2009 peak was a buying opportunity that held up for three months.


On Jul 09 05:13 PM PseudonymName wrote:

> I do not trust these numbers. The last time Bespoke reported these
> numbers they were exactly oppsite of the numbers reported here:<br/>
>
> www.market-harmonics.c...

Jul 10 01:56 PM