If you are having a hard time making sense out of what's going on in Washington regarding the government shutdown and the debt ceiling, trying to make sense out of investor sentiment is not going to be any easier. The charts below show the weekly readings of bullish and bearish sentiment from the American Association of Individual Investors (AAII). As shown in the top chart, even as the stock market has been steadily declining this week, bullish sentiment actually increased, rising from 37.84% up to 41.33%. While bullish sentiment rose this week, so too did bearish sentiment. As shown in the lower chart, bearish sentiment rose from 30.07% up to 33.58%.
It is not too often that you see a week where both bearish and bullish sentiment rise by three or more percentage points in the same week. In fact, the last time it happened was back in May 2009 just as we were coming out of the bear market. However, when you have a market where prices move on headlines or even rumors of meetings, you can't blame investors for being confused.