Bullish sentiment stayed near 50% for the fourth consecutive week in the latest AAII Sentiment Survey. Bearish sentiment is unusually low for the third time in four weeks.
Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded to 48.4%, an increase of 1.2 percentage points.This is the sixth time in seven weeks that bullish sentiment has been above its historical average of 39%.
Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, rebounded by 3.5 percentage points to 32.7%. This is the fourth time in six weeks that neutral sentiment has been above its historical average of 31%.
Bearish sentiment, expectations that stock prices will fall over the next six months, fell to 18.9%, a decrease of 4.7 percentage points. At more than one standard deviation below average, readings at this level are outside of the typical range for bearish sentiment we have seen over the survey's history. The historical average is 30%.
AAII members continue to remain optimistic about the short-term direction of stock prices. Though bullish sentiment is high, it is still within the range of optimism typically registered in the survey. A bullish sentiment reading above 50% would be considered unusually high, and a reading above 60% would be extraordinarily high, potentially signaling too much exuberance.
This week's special question asked AAII members what factors are causing them to be bullish, neutral or bearish. Respondents credited signs of an improving economy followed by better corporate earnings as the primary reasons for their optimism. Bearish respondents most frequently cited Europe's sovereign debt problems, followed by the economy, the federal deficit and Washington politics.
Here is a sampling of the responses:
- "The economic indicators are getting better; there is no choice but to turn bullish."
- "I'm bullish because of rising employment, the improving housing market and better corporate earnings."
- "The situation in Europe remains a overhang on the market."
- "Europe's problems and congressional infighting are going to keep the market in negative territory over the next six months."
- "With the elections in the U.S. and the problems in Europe, I think the ups and downs will even out."
- "We are at resistance and I don't think the current global economic conditions will let the market go up much more."
This week's AAII Sentiment Survey results:
- Bullish: 48.4%, up 1.2 percentage points
- Neutral: 32.7%, up 3.5 percentage points
- Bearish: 18.9%, down 4.7 percentage points
- Bullish: 39%
- Neutral: 31%
- Bearish: 30%
The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.