What rally?  That’s what individual investors are saying this week as bullish sentiment dropped to not only its lowest level of the current bull market but also its lowest level in more than a decade.  According to the American Association of Individual Investors (AAII), bullish sentiment declined from 19.34% down to 17.75% this week.  That took out the prior bull market low of 17.9% from January.

AAII Bullish 052616

Although bullish sentiment declined, bearish sentiment actually declined as well and by a larger amount than bullish sentiment.  As shown in the chart below, bearish sentiment fell from 34.1% down to 29.39%.

AAII Bearish 052616

The real standout of this week’s sentiment survey was neutral sentiment.  In this week’s survey, neutrals spiked 6.3 percentage points from 46.56% up to 52.86%.  That’s an extraordinarily large number and signifies that investors are increasingly apathetic towards the market with little conviction in either direction.  What is the most interesting about this trend is that in each of the three times that the S&P 500 has approached 2,100 in the last year or so, neutral sentiment spikes.  In other words, as prices climb investors are doubting whether stocks can make another leg higher.  Will the third time be the charm?

AAII Neutral 052616


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