As equities continue to levitate at or near all-time highs, bullish sentiment also ticked higher this week but still remains below 40% as it has for 42 straight weeks now. According to the American Association of Individual Investors (AAII), bullish sentiment increased from 31.29% up to 35.56% this week. That’s the highest level since mid-July and the biggest weekly increase in a month. Looking at the chart below, since late 2015, bullish sentiment has made a series of lower highs and lower lows, but if the current upswing holds on, that trend could break next week. The level to beat is 36.9%, and if that happens, the 40% level may just come into play. Wouldn’t that be something?
While bullish sentiment increased, bearish sentiment didn’t see much of a decline as it fell from 26.76% down to just 26.36%.
This week’s increase in bullish sentiment came almost entirely from the neutral camp. As shown in the chart below, neutral sentiment declined from 41.95% down to 38.08%. This is notable due to the fact that it has been common to see neutral sentiment increase when equities reach new highs. Therefore, with neutral sentiment starting to decline, it may signal that investors are becoming more comfortable with equities. From a contrarian perspective, that wouldn’t necessarily be such a good thing, but according to AAII data at least, we aren’t at the stage of complacency yet.