After collapsing below 25% at the start of June, bullish sentiment had rebounded for six consecutive weeks, but this week’s release of the AAII survey snapped that streak.  The percentage of bullish investors dropped to 31.74% from 35.93% last week.  This comes despite the major indices once again reaching all-time highs yesterday (which admittedly would have little effect on the survey due to timing) and earnings season kicking off to a solid start with rising beat rates and guidance spreads. While this was the biggest drop in bullish sentiment since May, it has not brought the indicator to any sort of extreme low, but it has now been below its historical average for 11 consecutive weeks. While that may sound like a long streak, in the history of the survey—going back to 1987—there have been 19 other such streaks; six of which continued on for twice as long.

Whereas bullish sentiment fell, bearish sentiment picked up.  Bears now outnumber bulls with 32.02% of investors reporting as bearish versus last week’s 28.64%. This is the first time that bears have outnumbered bulls since late June when a streak of nine straight weeks of this came to an end. Bearish sentiment has also now moved back above the historic average of 30.33% after staying below for two weeks. Before that, bearish sentiment was above average for 8 straight weeks.

Although bears outnumber bulls, neutral is still the predominant sentiment level at 36.24%. For a solid chunk of this year—16 of 30 weeks—those reporting as neutral have outnumbered both bulls and bears. That is already more than the entirety of 2018 (14 weeks) and is closing in on that count for 2017 (18 weeks).  Neutral sentiment continues to stay in a fairly tight range as it has for most of the year. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

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