Bearish Sentiment and Market in Denial Phase

Individual investor bullish sentiment moved fractionally higher as reported by the American Association of Individual Investors. The bullishness reading increased to 28.68% versus last week's reading of 27.91%. The bull/bear spread improved to -18% versus last week's level of -27%. The improvement came from bearish investors moving towards a more neutral stance.

As noted in an earlier post containing the Justin Mamis's sentiment cycle chart, is it likely the market is in the "denial" phase of the sentiment cycle?

Comments

[drewriders:]

I agree! We shall see what happens once fall hits. Could be nasty.

Jul 17 07:19 AM

[Old Trader:]

To be honest, I haven't done the research to confirm it for myself, but I've often heard it said that the AAII sentiment numbers are a contrairian indicator.

Jul 17 09:23 AM

[David I. Te...:]

OT,

That is correct. Individual investors were the least bullish (large negative bull/bear spread) in March of this year. This has been the case at other market low points. Conversely, they tend to be the most bullish at market tops. As Warren Buffett once said, "be fearful when others are greedy. Be greedy when others are fearful."


On Jul 17 09:23 AM Old Trader wrote:

> To be honest, I haven't done the research to confirm it for myself,
> but I've often heard it said that the AAII sentiment numbers are
> a contrairian indicator.

Jul 17 09:28 AM

[Larry House:]

"Phases" in the market can last for quite a while. We may have more upside before the phase changes.

Jul 17 11:21 AM

[Valley Boy:]

If you think you can do better, you are free to try your hand at writing an article which makes sense to you.


On Jul 17 08:18 AM tdweb wrote:

> The first graph is just noise. This article is a joke. This is more
> proof that seeking alpha has covert funders who are granted special
> previlages such as ability publish crappy, worthless articles on
> a consistent basis.

Jul 17 02:11 PM

[aldous:]

Europe and USA are in the tank for the next 5 years--there will be NO recovery here {a few quarters of minimal growth coming of a huge downside is all we can expect}. And China {grew at 7.9% at end June 2009???!!!!}. Come on, very massaged figures here on top of MASSIVE stockpiling and govt stimulus as well as easy lending by the banks. China is creating its own bubble--the majority of this stimulus has gone into stockpiling and speculation. Until we see REAL upticks in consumption and trade then this recovery is a pipe-dream. And where is that increase in consumption going to come from??? The USA or Europe--dont hold your breath, the consumers there are dead on their feet for the next 5 years.

Jul 18 01:06 AM