With the recent move higher in equities, individual investors jumped on the bullish bandwagon in a big way last week. According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment increased from 25.41% up to 35.6%. This was the biggest weekly increase in bullish sentiment since the end of March. Even after this week’s surge, bullish sentiment remains below its bull market average of 38.36% for the 13th straight week which is the longest streak of below average bullish sentiment readings since 2012.
In prior weeks, we have noted the elevated levels of neutral sentiment in the AAII sentiment surveys. With this week’s increase in bullish sentiment, you would have figured that some of those bulls may have come from the neutral camp. That was not the case, however, as bearish sentiment dropped by an even larger degree this week than bullish sentiment increased. As shown in the chart below, bearish sentiment in this week’s survey plunged by 12.6 percentage points falling from 34.3% down to 21.7%. That’s the lowest level of bearish sentiment since late February and the largest one-week decline since the first week of 2012.