By Charles Rotblut, CFA, AAII
Bearish sentiment rose to a seven-month high, while bullish sentiment fell to an eight-month low in the latest AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 10.0 percentage points to 25.4%. This is the lowest level of optimism recorded by the survey since September 22, 2011. This is also the sixth consecutive week that bullish sentiment has been below its historical average of 39%.
Neutral sentiment, expectations that stock prices will fall over the next six months, fell 3.6 percentage points to 32.5%. This is a four-week low. Nonetheless, neutral sentiment is above its historical average of 31% for the fourth consecutive week and the sixth out of the past seven weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, jumped 13.6 percentage points to 42.1%. This is the highest level of pessimism recorded by the survey since October 6, 2011. It is also the fourth time in the past five weeks that bearish sentiment has been above its historical average of 30%.
Bullish sentiment is at an unusually low level, and bearish sentiment is at an unusually high level. In quantitative terms, both readings are more than one standard deviation from their historical norms. Last year, bearish sentiment exceeded 44% five times between August and October. Thus, though pessimism is unusually high, it is not high enough to be correlated with a forthcoming market reversal. A bearish sentiment reading above 50% would be a stronger contrarian signal.
Disappointing April employment data, the French presidential election, and a return of downside market volatility combined to fray individual investors’ nerves. The continuing above-average level of neutral sentiment, however, shows that there is an ongoing push and pull of bullish factors (e.g., improved corporate profits, U.S. economic growth) and bearish factors (concerns about the pace of growth, Europe, high gas prices, etc.).
This week's special question asked AAII members what, if any, impact the current uncertainty about 2013 tax rates is having on their outlook for stocks. The majority of respondents said it was not impacting their outlook. Several members, however, thought the possibility of higher taxes next year is a negative factor.
Here is a sampling of the responses:
This week’s AAII Sentiment Survey results:
Historical averages:
Amazing how quickly things change.
Sometimes I wonder if we can ever have a sustained sell-off again…sentiment and fear reach levels after 4% sell-offs that 10%-20% sell-offs used to generate…
It’s like the bearishness from the panic and last two summers almosts guarantees equities move higher as everybody lands on one side of the bear boat automatically…
Who know…whichever way we go here it’s going to be hard and fast…
That’s what I noticed too. I also noticed that you are less than 110% bullish in your comments lately… are you changing your view or am I reading it wrong?
It is like a market of two minds… on days when it should plunge, it manages to crawl back in the afternoon. On days when it seems like a bounce is in order, we lose it through out the day. Bulls are nervous, so are da bears.
Contrary opinion would normally argue for a big rally here, based on the pessimistic sentiment. However, we also live in a world of “event risk”. One event after the bell was the JPM announcement of an $800 M trading loss, leading to SPX futures at minus 8+. We could also get negative news from EU. In the absence of major negative news, we should rally, but watch out for the Economic Surprises, which have turned negative, and might stay negative for a while.
Mark Hulbert has also commented on the increased volatility of sentiment readings, and the market’s reactions to them. I’ll paraphrase: “Sentiment readings that used to take weeks to go from bullish to bearish and back again can now go through an entire cycle from market open, to mid-day, to close.”
My investing has become much more difficult, as it seems like the retail investor used to generate bigger (more emotional?) peaks and valleys, that just aren’t there anymore.
© 2009 pragcap.com · Register for PC
By Charles Rotblut, CFA, AAII
Bearish sentiment rose to a seven-month high, while bullish sentiment fell to an eight-month low in the latest AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 10.0 percentage points to 25.4%. This is the lowest level of optimism recorded by the survey since September 22, 2011. This is also the sixth consecutive week that bullish sentiment has been below its historical average of 39%.
Neutral sentiment, expectations that stock prices will fall over the next six months, fell 3.6 percentage points to 32.5%. This is a four-week low. Nonetheless, neutral sentiment is above its historical average of 31% for the fourth consecutive week and the sixth out of the past seven weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, jumped 13.6 percentage points to 42.1%. This is the highest level of pessimism recorded by the survey since October 6, 2011. It is also the fourth time in the past five weeks that bearish sentiment has been above its historical average of 30%.
Bullish sentiment is at an unusually low level, and bearish sentiment is at an unusually high level. In quantitative terms, both readings are more than one standard deviation from their historical norms. Last year, bearish sentiment exceeded 44% five times between August and October. Thus, though pessimism is unusually high, it is not high enough to be correlated with a forthcoming market reversal. A bearish sentiment reading above 50% would be a stronger contrarian signal.
Disappointing April employment data, the French presidential election, and a return of downside market volatility combined to fray individual investors’ nerves. The continuing above-average level of neutral sentiment, however, shows that there is an ongoing push and pull of bullish factors (e.g., improved corporate profits, U.S. economic growth) and bearish factors (concerns about the pace of growth, Europe, high gas prices, etc.).
This week's special question asked AAII members what, if any, impact the current uncertainty about 2013 tax rates is having on their outlook for stocks. The majority of respondents said it was not impacting their outlook. Several members, however, thought the possibility of higher taxes next year is a negative factor.
Here is a sampling of the responses:
This week’s AAII Sentiment Survey results:
Historical averages:
Amazing how quickly things change.
Sometimes I wonder if we can ever have a sustained sell-off again…sentiment and fear reach levels after 4% sell-offs that 10%-20% sell-offs used to generate…
It’s like the bearishness from the panic and last two summers almosts guarantees equities move higher as everybody lands on one side of the bear boat automatically…
Who know…whichever way we go here it’s going to be hard and fast…
That’s what I noticed too. I also noticed that you are less than 110% bullish in your comments lately… are you changing your view or am I reading it wrong?
It is like a market of two minds… on days when it should plunge, it manages to crawl back in the afternoon. On days when it seems like a bounce is in order, we lose it through out the day. Bulls are nervous, so are da bears.
Contrary opinion would normally argue for a big rally here, based on the pessimistic sentiment. However, we also live in a world of “event risk”. One event after the bell was the JPM announcement of an $800 M trading loss, leading to SPX futures at minus 8+. We could also get negative news from EU. In the absence of major negative news, we should rally, but watch out for the Economic Surprises, which have turned negative, and might stay negative for a while.
Mark Hulbert has also commented on the increased volatility of sentiment readings, and the market’s reactions to them. I’ll paraphrase: “Sentiment readings that used to take weeks to go from bullish to bearish and back again can now go through an entire cycle from market open, to mid-day, to close.”
My investing has become much more difficult, as it seems like the retail investor used to generate bigger (more emotional?) peaks and valleys, that just aren’t there anymore.
© 2009 pragcap.com · Register for PC
By Charles Rotblut, CFA, AAII
Bearish sentiment rose to a seven-month high, while bullish sentiment fell to an eight-month low in the latest AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 10.0 percentage points to 25.4%. This is the lowest level of optimism recorded by the survey since September 22, 2011. This is also the sixth consecutive week that bullish sentiment has been below its historical average of 39%.
Neutral sentiment, expectations that stock prices will fall over the next six months, fell 3.6 percentage points to 32.5%. This is a four-week low. Nonetheless, neutral sentiment is above its historical average of 31% for the fourth consecutive week and the sixth out of the past seven weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, jumped 13.6 percentage points to 42.1%. This is the highest level of pessimism recorded by the survey since October 6, 2011. It is also the fourth time in the past five weeks that bearish sentiment has been above its historical average of 30%.
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