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Surprising Info in 52 Week MA of AAII Bulls Minus Bears Survey Data

This article was originally posted today at Kirk's Market Thoughts as AAII Bulls Minus Bears vs DJIA Survey Data and Graph for 4/29/2010

The AAII Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months . AAII is the "American Association of Individual Investors." For the survey, Individual members of the AAII are polled on a weekly basis. Only one vote per member is accepted in each weekly voting period. The AAII reports the weekly results at www.aaii.com/sentimentsurvey/.
As of 04/28/2010, the AAII members are:
  • Bullish: 41.36%
  • Neutral: 30.00%
  • Bearish: 28.64%
The 52 wk MA of Weekly sentiment is about as low as it was in 1994 before the market put on a great 5 year advance. Will this repeat? Post your answer in the comments section below.

This chart shows the 52-week moving average of the AAII bull/bear index (American Association of Individual Investors). 52 weeks removes seasonality from the number and gives startling results.
 Click chart for full size image
 
Charts of the AAII (American Association of Individual Investors) Bulls minus Bears Index versus the market are key sentiment indicators for stock market technical analysis.  Contrarian theory states the time to buy is when fear and pessimism are at a maximum since this usually occurs near market bottoms.

More Information
  • A contrarian is a person with a preference for taking a position opposed to that of the majority view prevalent in the group of which they are a part.
  • More about Technical Analysis & Sentiment Indicators






Disclosure: Long SPY