It’s amazing how quickly sentiment can change in the market.  Coming into the week, all anyone could talk about was how the S&P 500 has been up for six straight weeks and was within a couple of percentage points of all-time highs.  Just three days later, it’s all about how equities have been down for six of the last seven sessions, and the S&P is now testing its 200-DMA to the downside.  The shifting sentiment can also be seen in the latest poll of investor sentiment from the American Association of Individual Investors (AAII).  In this week’s survey, bullish sentiment dropped by 4.7 percentage points to 34.27% from 39.0.  That may not sound like a lot, but it ranks as the largest one-week decline since the end of July and takes bullish sentiment back below its bull market average.  The two-week period of above-average bullish sentiment didn’t last long.

As bullish sentiment dropped, bearish sentiment spiked higher.  In this week’s survey, the bearish camp swelled to 23% from last week’s level of 18.6%.  Last week’s 18.6% level was the first sub-20% reading since February, so like the above average reading in bullish sentiment, the low bearish reading didn’t last long either.