Bull/Bear Ratio

Very nice chart from Jason at Sentiment Trader.com on the Bull Bear ratio relative to markets:

Aaii_bull_ratio

Sentiment Trader is an interesting site worth exploring . . .

UPDATE:  May 4, 2007 12:35pm

The value of Sentiment as an indicator is that when it reaches extremes, it can provide a good contrary signal.

People tend to get bullish after they buy, and bearish after they sell. So what thy actually do — and then say — can get reflected in these signals.

For a primer, see this report: Contrary Indicators of the 2000 – 2003 Bear Market

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What's been said:

Discussions found on the web:
  1. G Eddy commented on May 4

    It would be very helpful if some knowlegeable person would explain what these two seemingly paradoxical graphs indicate. I haven’t a clue.

  2. Chris commented on May 4

    It means we are going much much much (are you getting this?) higher. Everytime sentiment was this bad the market exploded.

  3. erik commented on May 4

    not quite true. per the minyanville article yesterday, the bears jumped to over 50% right at the march 2000 high.

    my thoughts are there is little statistical significance based on the unprecedented run we’ve been on. if we close higher today it will be the first run of it’s kind in history 23 out of 26 days for the dow.

    http://www.minyanville.com/articles/S%26P-Dow-AAII-Gold/index/a/12742

  4. Karl Smith commented on May 4

    The basic information is this

    The top graph shows the performance of the overall market, looks like S&P 500 to me.

    The bottom shows how many people think the market is going to go up relative to those who think the market will go down.

    When the blue line on the bottom graph is how many people think the market will go up. When the blue line is high lots of people are bulls. When the blue line is low lots of people are bears.

    Now I can’t quite see if sentiment is leading or lagging market movements on that graph. I think you would really need the raw data for that

  5. S commented on May 4

    The DJIA just traded down 8 points. I suppose that was the scary correction everyone has been waiting for.

    Turn those machines back on!!!

  6. Byno commented on May 4

    I’m a subscriber to AAII, and using their published data since 1987, the correlation of sentiment and returns is a whopping 0 at the 95% confidence level.

    I’m seeing a lot of anecdotal evidence that Joe and Jane Sixpack are scared of this market, which leads me to be short term bullish, but AAII, Investors Intelligence or Market Vane are effectively useless in using sentiment to call tops or bottoms in the market.

  7. Estragon commented on May 4

    I suspect you’d need to do a sentiment survey of asian central bankers to get a useful indicator of future market direction ;-)

  8. John commented on May 4

    Estragon wins. :o)

  9. Jdamon commented on May 4

    Joe and Jane sixpack are still smarting from the can of whop-ass they got in the dot.com crash. It will still be awhile longer until they dip their feet in the pool.

    Not sure they matter all that much anyhow.

  10. D. commented on May 4

    Joe Sixpack has no money, is mortgaged to the max and being called by advisors to leverage his kids’ education fund or RRSPs.

    In the last few months, I’ve been getting all kind of calls from family and friends with no money and a big mortgage asking if they should borrow to invest!

    The 20 year party is nearly over. Even if short rates are cut, long rates are still at all time lows. The reason why cycles have been more manageable in the last 25 years is because there was always room to cut rates to stimulate the economy. Those days are just about over.

  11. erik commented on May 4

    wtf just happened with the spy aftermarket. looks like a short-side fund was squeezed out. west from 150.65 to 150.92? this after the yhoo/msft deal falls through.

  12. Granville commented on May 4

    not everyone that reads this blog is from kentucky living in a trailer park

  13. John commented on May 4

    yc32,

    It’s better to make a link for URLs; this blog host almost always sends them off the side of the page.

    If you don’t know how, it’s easy. Just replace the brackets with the arrows in the following example:

    [a href=”www.url.com/page/etc.htm]link text[/a]

  14. John commented on May 4

    Awww, crap; I didn’t proof read closely enough. Include a closing quote mark in the first part, like so:

    [a href=”www.url.com/page/etc.htm”]link text[/a]

  15. Momo Fader commented on May 4

    >>
    I’m seeing a lot of anecdotal evidence that Joe and Jane Sixpack are scared of this market, which leads me to be short term bullish …
    << Byno, I'm not sure that's a proper conclusion unless you are blindly willing to follow a mostly meaningless indicator like those crackers at bespoke obviously are. I joined AAII for about 6 mo.s last year until I realized they had nothing to teach me. I availed myself of the refund, happily. I'd love to see more data, but your average AAII poll taker is not selling stocks short. They're sitting on their wallet when they're bearish. J6P has no money to put into the market, although all the CNBC Cheerleaders and Big Brokers are really turning up the propaganda. I'm seeing anecdotal evidence all over message boards and blogs that bulls are naive and extremely hubristic. The humble market participant is the long term market participant. All over the place you see bulls with the attitude that they should be handfed grapes from the stock market horn o plenty. The rookies are all in, and the pros are going to have to take their money or nothing at all. Lately they've been taking the rookie short seller's money, but that jig runs out of steam eventually. J6P has no money to put in the market. Maybe he'll borrow some and give her a whirl, but I doubt that can last for long. My guess is it's already happened. Where was that data on margin borrowing?

  16. Momo Fader commented on May 4

    >>
    I’m seeing a lot of anecdotal evidence that Joe and Jane Sixpack are scared of this market, which leads me to be short term bullish …
    << Byno, I'm not sure that's a proper conclusion unless you are blindly willing to follow a mostly meaningless indicator like those crackers at bespoke obviously are. I joined AAII for about 6 mo.s last year until I realized they had nothing to teach me. I availed myself of the refund, happily. I'd love to see more data, but your average AAII poll taker is not selling stocks short. They're sitting on their wallet when they're bearish. J6P has no money to put into the market, although all the CNBC Cheerleaders and Big Brokers are really turning up the propaganda. I'm seeing anecdotal evidence all over message boards and blogs that bulls are naive and extremely hubristic. The humble market participant is the long term market participant. All over the place you see bulls with the attitude that they should be handfed grapes from the stock market horn o plenty. The rookies are all in, and the pros are going to have to take their money or nothing at all. Lately they've been taking the rookie short seller's money, but that jig runs out of steam eventually. J6P has no money to put in the market. Maybe he'll borrow some and give her a whirl, but I doubt that can last for long. My guess is it's already happened. Where was that data on margin borrowing?

  17. Momo Fader commented on May 4

    Sorry for the double post Barry. Your site has been sporadically slow all day. Might want to have someone look into it. Or maybe I’m just a spazz.

  18. john commented on May 4

    i find it interesting that nobody says squat how the market never fell when sentiment indicators were wildly bullish in nov and dec. its only when its ood for the bulls anythings mentioned. no mention about 330 bil in margin debt. d day is near

  19. John Thompson commented on May 4

    4.9 trillion in margin debt. WSJ last week.
    Trillion here (from China? dollar bloated markets) keep it going up up up?????

  20. esb commented on May 4

    SPY and other broad indices will not roll over without a blowoff…probably a series of 100 point up dow days to catch the attention of everyone simultaneously.

    The trigger for such a series could well be a symmetrical bias statement in no uncertain terms out of the meeting next week.

    First 100+ on the leak…next 100+ on the release…next 100+ for momentum’s sake.

    Unless and until we get such a move this stairstep up can go on and on…but when the big up series hits ‘ya better be ready ta get out of Dodge.’

    Fast.

  21. esb commented on May 4

    SPY and other broad indices will not roll over without a blowoff…probably a series of 100 point up dow days to catch the attention of everyone simultaneously.

    The trigger for such a series could well be a symmetrical bias statement in no uncertain terms out of the meeting next week.

    First 100+ on the leak…next 100+ on the release…next 100+ for momentum’s sake.

    Unless and until we get such a move this stairstep up can go on and on…but when the big up series hits ‘ya better be ready ta get out of Dodge.’

    Fast.

  22. Momo Fader commented on May 4

    esb: “SPY and other broad indices will not roll over without a blowoff …”

    Why not? Are you just parroting something you’ve heard, or is there a basis for this claim? I’m not saying it’s impossible, I’m just saying that it is not a necessary precursor.

  23. Winston Munn commented on May 4

    The U.S. Army Corps of Engineers announced today that the Wall of Worry was near completion, and although a kazillion dollars over projections and a year late in completion, the final brick should be laid within 90 days.

    When completed, the wall will be utilized as a flood control to halt the onrushing tide of liquidity from overwhelming even more of the country – so far, damage has been limited to a few million homes and some outlying banks.

  24. Winston Munn commented on May 4

    Market Maker Alert!!!

    Here is some news from Chris Gaffney at The Daily Reckoning that should make even Cramer sit up and take notice.

    “I’ve explained to everyone that as far as I am aware, there are currently three subcommittees from the U.S. House of Representatives that will hold joint hearings on Wednesday, May 9th, to focus on China. The discussions will center on to what extent not only China’s renminbi (CNY) is undervalued as a result of the Government, but also Japan’s yen.

    “They will most likely come to the conclusion that these are ‘highly manipulated’ currencies by each respective Government. Now here’s where it gets really meaty… The subcommittees, if finding the currencies are manipulated, will then discuss two things… 1. What further tariffs should be placed on their goods coming to the United States? And 2. Why the U.S. government, namely the Treasury Department, has not done more to rectify this situation?

    Uh-Oh… That sounds to me like they are greasing the tracks for the protectionism measures that are already in the pipeline!”

    Even Ferdinand the Bull would blink if Japan and China are threatened with protectionist measures.

  25. Momo Fader commented on May 6

    Hey Winston,

    Saw that. My bet is on MGPI for protectionist reasons. Wheat gluten tariffs and/or quotas. Just a reasoned conclusion. Co. is lobbying hard, based on external evidence. Make money where you can in these c-sucking markets.

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