AAII Bullish sentiment plunges to Gozer levels

Discussion in 'Economics' started by Covertibility, Apr 11, 2013.

  1. Bullish 19.3% (down 16.2) Lowest since March 5, 2009

    Neutral 26.2% (down 10.2)

    Bearish 54.5% (up 26.3) Highest since July 8, 2010

    Did I miss the coming of Gozer or did someone slip and fall down on Dancing with the Stars? What the hell happened in the past week?
  2. I've noticed that many of these sentiment surveys (like Investors Intelligence) have been worthless for much of the past year. The AAII is no different.... and the NAAIM that Sentiment Trader is equally worthless, especially given the small sample size that averages about 30 advisors each week.
  3. Commentary by Charles Rotblut, CFA, AAII regarding the recent AAII numbers:

    A total of 145 AAII members took the survey this week. This is down from the three-month average of 330 responses. A weekly “reminder” email normally sent to a sample of our members was unintentionally not sent this week. Previous drops in the number of respondents on a given week have not resulted in the magnitude of change recorded in this week’s survey, however. Furthermore, 145 is not an abnormally low number of responses for the survey.

    We are not seeing any specific signs that would suggest why pessimism surged and optimism fell so much. The disappointing jobs report could have played a role. We can say that some members have previously expressed concern that stock prices have moved too far, too fast and are now due for a pullback.

    At current levels, bearish sentiment is at an extraordinarily high level (more than two standard deviations above its historical average) and bullish sentiment is near an extraordinarily low level. (A bullish sentiment reading below two standard deviations would be 17.9%.) Such readings have historically been a contrarian signal. Though there is a correlation with between extraordinary sentiment readings and market reversals, as is the case with any single market indicator, the correlation is not perfect. Therefore we would consider other indicators and factors before making any judgment on the short-term direction of stock prices.

    This week’s special question asked AAII members if the rhetoric from and the actions by North Korea are influencing their short-term outlook for stock prices. More than 80% of respondents said no, the terse language and actions from North Korea are not impacting their sentiment. A few members said it was having some impact, but also noted that other macro factors are also influencing their sentiment toward U.S. stocks.
  4. 1) The problem is that it measures "retail" sentiment and not institutional sentiment. :(
    2) A lot of small traders can get "predictably" bearish when the market is making new highs, especially all-time highs, while having a "regression to mean" mentality that the market has to re-trace sooner rather than later. :eek:
    3) It would be "better" if there were a larger sample size among those surveyed in order to get a more "robust" measure. :cool:
  5. From The Big Picture:Putting Investor Bearish Sentiment into Context


    There are numerous sentiment surveys out there, I posted this one because of drop. One would think that a survey would figure out an adequate sample size before publishing.
  6. Looking at your table, looks like it's a decent signal for being up in the next month. Past that, no validity.