After an extremely weak sentiment survey from the American Association of Individual Investors last week, bulls saw a sharp bounce this week, rising to 30.17% from 17.75%.  That increase was the largest one-week surge in bullish sentiment since November 2013.  To illustrate just how depressed sentiment was, though, even after this week’s increase, bullish sentiment still remains well below average and has now been under 40% for 65 out of the last 66 weeks (and 31 straight).

AAII Bullish 060216

What’s most interesting about the big increase in bullish sentiment is that practically none of these new bulls came from the bearish camp.  As shown in the chart below, bears only saw a slight decline, falling from 29.39% down to 29.05%.

AAII Bearish 060216

The big decline this week came from the neutral camp, which shrunk from 52.86% last week to 40.78% this week.  Last week we noted that every time the S&P 500 approaches 2,100, neutral sentiment surges.  With this week’s decline in neutral sentiment even as the S&P 500 remains right near 2,100, will the trend finally break?

AAII Neutral 060216


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