SMALL INVESTOR BULLISH SENTIMENT SOARS NEAR 2010 HIGH
by ilene - September 10th, 2010 10:25 am
SMALL INVESTOR BULLISH SENTIMENT SOARS NEAR 2010 HIGH
Courtesy of The Pragmatic Capitalist
Talk about a schizophrenic market. Just two weeks ago the sky was falling. As sentiment plummeted the excessively fearful shorts were caught flat footed and an impressive short covering rally ensued. Now, just a few economic reports and a brief rally later small investors are convinced that there are no risks coming down the pike. The AAII’s bullish sentiment survey showed a remarkable rebound in recent weeks. After hitting 21% just two weeks ago the percentage of bullish investors has surged to 43.9% – the highest reading since April 15th when sentiment hit 48.5% and just days prior to the Q1 market peak. AAII elaborated on the results:
“Bullish sentiment of individual investors rose 13.1 percentage points to 43.9% in the latest AAII Sentiment Survey. This is the most bullish individual investors have been on the market outlook six months forward since bullish sentiment reached 48.5% on April 15, 2010. The historical average is 39%.
Over the last two weeks, investor sentiment has swung from bearish sentiment outweighing bullish sentiment by 28.7 percentage points to bullish sentiment outweighing bearish sentiment by 12.3 percentage points.
Bullish investors predominately mention that pessimism seems to have reached an extreme which should favor stocks going forward–the sky is not falling.”
The Investors Intelligence survey also showed a rebound in sentiment as bullishness jumped to 33.3% from last week’s reading of 29.4%. Although there has been a slight rebound in this data it is not at the same extremes seen in the AAII data.
Source: AAII, II
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BULLISH SENTIMENT SURGES NEAR JANUARY HIGH
by ilene - March 11th, 2010 3:16 pm
BULLISH SENTIMENT SURGES NEAR JANUARY HIGH
Courtesy of The Pragmatic Capitalist
The warning flags continue to pop up all over the place and investors continue to run head first into stocks. None of the recent warning flags are as alarming as today’s huge spike in individual investor
Individual investor sentiment has reached levels that have historically been followed by very poor equity returns. A few of the notable periods when investor sentiment was this high include:
- A 50% reading prior to a 3 month 10% sell-off in Q2 2008
- A 45% reading prior to the 2008 market crash
- A 47% reading prior to the 20% sell-off to the March 2009 lows
- A 49% reading prior to the January 2010 sell-off
No indicator is perfect and this one has certainly been excessively bullish at points during the 2009 rally, but it confirms the growing bullish trend that we saw in yesterday’s Investors Intelligence poll where financial advisers increased bullishness to 44.9%. With institutional investors stacking up on the bullish side of the trade and now individual investors stacking up on the same side you just have to wonder – who is left to buy stocks? Better yet, who are they going to sell to?
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CONTRARIAN SIGN? PORTFOLIO MANAGERS ARE GETTING VERY BULLISH
by ilene - March 9th, 2010 3:03 pm
CONTRARIAN SIGN? PORTFOLIO MANAGERS ARE GETTING VERY BULLISH
Courtesy of The Pragmatic Capitalist
The sentiment signals are starting to stack up against the bulls. Last week Mark Hulbert at MarketWatch reported that Advisory bullishness was “dangerously high”. He reports that bullishness hasn’t been this high since before the 2007 market highs:
“Based on the several hundred investment advisers I track, I’d have to say that bullish sentiment is approaching dangerously high levels. Consider the Hulbert Stock Newsletter Sentiment Index (HSNSI), which represents the average recommended stock market exposure among a subset of short term stock market timers tracked by the Hulbert Financial Digest.
It currently stands at 62.8%, up from 13.8% just one month ago. That’s an awfully big jump for so short a period of time, especially considering that the Dow Jones Industrial Average rose a modest 4.4% over this period.
Also worrying is that, with but one exception, the HSNSI is now at its highest level since early 2007, more than three years ago.”
That one exception came in early January just before the market rolled over 9%.
In addition, David Rosenberg noted just yesterday, that portfolio
“as charts below from the ICI illustrates,
portfolio managers have been so nervous to miss any up-moves that they have run down their cash holdings to 3.6% of assets from nearly 6% a year ago — the largest decline in 19 years. Equity cash ratios are back to where they were in September 2007, just as the stock market was hitting its peak.”
This new found bullishness by portfolio managers and advisors could be seen as a contrarian sign of things to come.
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BULLISH SENTIMENT DROPS SUBSTANTIALLY
by ilene - January 8th, 2010 10:02 am
BULLISH SENTIMENT DROPS SUBSTANTIALLY
Courtesy of The Pragmatic Capitalist
After having entered the year in an overwhelmingly bullish fashion, investors have tempered their bullish perspective a bit. The latest sentiment reading from AAII showed a sharp decline from 49% to 41% bulls. Many investors have expressed caution due to the high reading coming into the beginning of the year. This less bullish position is consistent with the recent data on small speculators from the CFTC.
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BULLISH SENTIMENT WAVES WARNING FLAGS
by ilene - January 1st, 2010 4:06 pm
BULLISH SENTIMENT WAVES WARNING FLAGS
Courtesy of The Pragmatic Capitalist
Sentiment hasn’t been this positive about the stock market since just before the 1987 market crash. The latest readings from Investors Intelligence and AAII show that newsletters and small investors are very bullish in the near-term. This could be a major warning flag about the potential short-term performance of the equity markets.
The Investors Intelligence poll, which tracks 140 different newsletters, hasn’t been this bullish(?) since 1987. This has proven to be a superb short-term indicator. The last extreme was a 54% bearish reading at the October lows last year. Now, at 15% bears, the bulls feel equity markets have much room to run.
The survey of small investors at AAII is also showing an extreme level of optimism with 49% of investors bullish. It’s interesting to note the high level of put buying on Friday as investors hedged themselves heading into the new year.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.