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With the S&P 500 on pace for its third straight week of gains, investors are getting hopping on the bullish bandwagon - in a big way. According to this week's survey of individual investors from the American Association of Individual Investors (AAII), bullish sentiment rose by 6.3 percentage points to 46.11%. Adding this week's increase to last week's jump of 8.92 percentage points, the two-week increase in bullish sentiment (15.2) is the largest two-week increase since last July. This week's level of bullish sentiment is also the first reading above 40% since early June and actually represents the highest reading of bullish sentiment so far this year. While less than half of individual investors are bullish, we are getting close to that 50% threshold that has spelled short-term trouble in the past.

As bullish sentiment surges, bears are moving to the sidelines. This week's level of bearish sentiment declined from 26.96% last week down to 23.65%, which is the lowest weekly reading since early July. The last time bearish sentiment saw as big a two-week decline as it has the last two weeks (14.58 percentage points) was back in late October of last year.