SENTIMENT SHIFTS TO NEUTRAL

Sentiment has once again shifted rapidly in recent weeks as the bi-polar market continues its confused, drunken walk.   The Investors Intelligence Survey showed a bullish reading of 52% before the correction started, but investors have dramatically tempered their expectations as the latest reading shows just 35.6% bulls.   At the peak the bears were just 19% vs 27.8% bears today.  This bull bear ratio of 1.28 is relatively neutral in historical terms.

The AAII survey is also showing relatively neutral readings.  The most recent data showed a marginal decline versus last week.  Charles Rotblut of the AAII provides some details:

“Neutral sentiment hit a six-week high in the latest AAII Sentiment Survey. The percentage of individual investors expecting the markets to remain flat over the next six months reached 28.9%.

At the same time the spread between the bulls and the bears narrowed to less than one percentage point. Bullish sentiment registered 35.8% and bearish sentiment registered 35.2%. This is the smallest spread between those expecting stocks to rise (bulls) and those expecting stocks to fall (bears) since December 24.”

All in all sentiment has shifted back to a neutral reading as the markets stabilize.  This high volatility in sentiment is a clear sign of utter confusion on the part of market participants and creates a landscape that is ripe for dramatic moves in either direction.

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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