Every Thursday, the American Association of Individual Investors releases the results of Investor Sentiment Survey. It asks members about the prospects for stocks over the next six months, whether they’re bullish, bearish, or neutral. As with most sentiment surveys, these investors are most bullish at market peaks, most bearish at market bottoms. To them, rising prices mean falling risks, while falling prices mean rising risks.
This week there was a surprising drop in bullishness–and a corresponding increase in bearishness–among the members, as can be seen in the chart below. The top panel shows the percentage of respondents who said they were bullish, a mere 22%. That’s as low as the bears have been since the March bottom. In the past, such readings marked good times to buy the S & P 500, although, as can be seen, the readings didn’t always mark the bottom (witness 2008 readings), but a bottom. (more…)