This morning’s AAII sentiment survey is consistent with just about every other sentiment reading of late – investors are wildly confident that stocks will be higher in the coming 6 months.  The optimism is almost near universal. The following chart tells the story of this bi-polar market.  On August 26th, just days before the market bottom, the bullish sentiment hit just 20.7% – no one thought stocks were set to rise.  Now, after a 20% rise in equities the consensus is uniformly positive.

Charles Rotblut of AAII elaborated on this morning’s results:

“Bullish sentiment, expectations that stock prices will rise over the next six months, rose 13.1 percentage points to 63.3% in the latest AAII Sentiment Survey. This is the highest level of optimism since November 18, 2004. This is also the 16th consecutive week that bullish sentiment has been above its historical average of 31%, the longest such streak since 2004.

Neutral sentiment, expectations that stock prices will remain essentially flat, declined 2.3 percentage points to 20.3%. This is a six-week low for neutral sentiment and the 20th consecutive week that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 10.7 percentage points to 16.4%. This is the lowest level of pessimism since July 14, 2005. It is also the 11th time in the past 12 weeks that bearish sentiment has been below its historical average 30%.

The spread between bullish and bearish sentiment is currently at +46.9 points. This is the most positive bull-bear spread since April 15, 2004, when it reached +50.0 points. A wider differential was recorded on March 5, 2009, when the bull-bear spread fell to -51.4 points.

Bullish sentiment is more than two standard deviations from its historical mean, making it a statistical outlier. In simpler terms, bullish sentiment is running red hot. In fact, the current reading is the 18th highest since the survey started in 1987. Higher readings were recorded in 1987, 2000, 2001, 2003 and 2004. Such high levels of optimism have been correlated with a decline in the S&P 500 over the proceeding 24 weeks, though the magnitude of the declines have varied.  A spreadsheet showing all of the survey’s historical data is attached.”

Source: AAII


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • 3421138532110

    Ladies and gentlemen, please take your seats and fasten your seat-belts, we’re about to encounter some turbulence…..

  • LVG

    I’ll turn bearish when Zero Hedge turns bullish.

  • Nedly

    “I’ll turn bearish when Zero Hedge turns bullish.”

    So never?

  • Brandon Ferro

    Lol hilarious this is.

  • http://seekingdelta.wordpress.com/ seekingdelta

    The AAII bullish sentiment reading of 63.3% is the highest since November of 2004 and is the 18th highest reading since the survey started in 1987. There have been 1,222 weekly surveys putting the 63.3% bullish reading in the top 1.5% of all readings.

  • Too Late Smart

    So long fellas, its been good to know ya.

  • Whiskey Tango Foxtrot

    “Bull markets are born on pessimism, grow on skepticism, mature on
    optimism, and die on euphoria.” Sir John Templeton

    We are somewhere between optimism and euphoria.

    or not.

  • Whiskey Tango Foxtrot

    I meant – somewhere between euphoria and ecstasy.

  • domingo

    Take a look at the numbers:

    08/31/10 SPY= 104.20 AAII(bulls)=20.74% !!! bears=49.47%

    10/29/10 SPY= 117.87 AAII(bulls)=52.23% bears=21.60%

    12/23/10 SPY= 125.60 AAII(bulls)=63.28% !!! bears=16.41%!!!

  • Mezzoduomo

    Dumb money indicator, for sure. When we see a ‘bullish’ Time magazine cover, the final act will begin.

  • MiningJunkie

    Never underestimate the replacement power of equities within an inflationary spiral.

  • Lurftah Nurftah

    When everyone is bullish, they have invested their monies. If no more buying, then a little selling starts to take hold.