For all the talk about a supposed correction in the last few days, you wouldn’t know it from the chart of the S&P 500 and bullish sentiment below.  If you squint real close, you can see something resembling a small decline for the S&P 500 (red line), but it’s negligible at best. That hasn’t stopped individual investors in the weekly AAII survey from becoming a little bit more cautious, though.  In this week’s survey, bullish sentiment declined from 45.5% down to 44.8%.  That’s the third weekly decline in the last four weeks, and during that time the bullish ranks have thinned by 15 percentage points.  We’ve commented in the past several days that because markets have seen such a steady climb upward, even small declines in equity prices may spook investors and you could argue that the weekly sentiment numbers from AAII are showing just that.

Bearish sentiment, meanwhile, has been moving in the opposite direction.  This week’s survey showed an increase in pessimism of nearly five percentage points as bearish sentiment increased from 24.0% up to 28.8%.  In the last four weeks, bearish sentiment has now nearly doubled from its second lowest reading of the bull market back in early January.

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