AAii Sentiment Data

AaiiPeter Boockvar writes:

A measure of stock market sentiment out today is at levels similar to last October when the major indices hit record highs.

The American Assoc of Individual Investors weekly data today has Bulls at 53.3% and Bears at 26.3%. The high in Oct was 54.7% in the Bulls and 25.4% in the Bears.

The caveat with this # is that individual investors are very fickle and thus this data is all over the place week to week and is much more volatile than the weekly Investors Intelligence data.

I don’t track this survey regularly — I prefer either trade based measures (Put/call ratio, fund manager cash on hand), but I also do not dismiss surveys totally.

Anyone have any long term experience with this survey series?

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What's been said:

Discussions found on the web:
  1. Ross commented on May 1

    Please don’t tickle me with a single data point. Is it time to cry, yell or fold?

    Just kiddin. Still luv ya.

  2. jj commented on May 1

    II Bulls/Bears is a better measure … but both should be used as contra indicators

  3. Ross commented on May 1

    Way OT but the talking head, Brian Westbury makes Dennis Kneale look like a savant!

  4. bdg123 commented on May 1

    I have some experience. The last experience would be October. :) I can usually tell when greed becomes excessive. And, we are surely at that point. Almost as bad as last May. Which was the highest since early 2000. Not surveys but market speculation. Party hearty!

  5. Steve Barry commented on May 1

    The 10 day Total put/call is at levels that for the last year predict a 2 month downturn in the market. QQQQ volume has been pathetic for 2 months and has very low short interest…major QQQQ names also have no short interest. Bullishness is rampant.

  6. UrbanDigs commented on May 1

    What timing. I just had discussion with reader on urbandigs 8 min before you put this article up, as we were discussing street sentiment.

    I said:

    i disagree..I think the sentiment on street is one of cautious optimism. Optimism that fed removed systemic risk. Optimism that earnings will hang tough. Optimism that credit markets are getting bids. VIX is around 20, down sharply from 35 spike when BSC deal went down.

    Shorts covered, and everybody expects a rate pause NOW and ultimately a rate hike signaling that growth is no longer the main concern, inflation is.

    HOWEVER, what if economic data comes in bad? What if unemployment rate trickles higher towards 7%? What if we havent yet seen the full damage from credit storm? With street sentiment shifting away from real bad economic data, if it does occur, stocks will quickly selloff gains. So hard to predict, but fun to trade the volatility”

    This little survey I guess confirms!

  7. pclema commented on May 1

    Talking about sentiment, has anyone seen the Barron’s panic/euphoria gage. It has been flat forever in the panic region and is now shooting towards euphoria. Not sure what goes into the indicator though. http://tinyurl.com/5zpfsl

  8. Eric commented on May 1

    Over the past six months, we’ve seen some form of the sentence, “The worst ____ since the Great Depression,” about 12,000 times on every media outlet in the country. And yet right now, the S&P 500 is down just 3.9% on the year. 3.9%!!! Are the Fleckensteins and Abelsons already reaching again for dunce caps? (though not that they would ever acknowledge it). If we head no lower from here for the rest of the year, it’s going to be very dicey for bearish pundits — again.

  9. Steve Barry commented on May 1

    Pclema,

    Your link didn’t work, but I went to Barrons and saw it…thanks that is a stunning spike.

    Yet anyone notice some ABX indices are below 7 friggin cents on the dollar? Holy disconnect with investor euphoria!

    ABX

  10. Eric Davis commented on May 1

    We just need to break out solidly above the range, show no follow through.. get some bear capitulation.. Then we can come back… But we usually see a day or two of distribution.. which we have yet to see…

    Get everyone thinking we are going to the moon…. Hear Kudlow and cramer talking about 1500. Cramer did bless about every stock in his portfolio of 2000 stocks last night. Bullish on Ketchup… That is a growth industry…. Generic.

    and maybe we can get Maria Giggling this afternoon… Bless her heart.

    But me, I like to see confirmed trends before jumping on them…

    Either that or we are going to 1500.

    I wouldn’t’ rush it… If/when we come back, it will be a slow process for the first week of it…

    Manic Bulls, Suicidle Bears… that is what I’m looking for.

  11. Eric Davis commented on May 1

    Caution is the middle emotional state of the bear market… followd by the actuall capitulation…

    not sure it’s good as an emotional metric….

    but it may override the Greed/manic ques.

    IMO ;)

  12. Steve Barry commented on May 1

    We may have just seen the bears capitulate on this wacky spike in Dow…not me though.

  13. park smarts commented on May 1

    HAHAHAHAH the ABX tranches. the whole lot of em (tranches) are trading within cents of each other. check it out for yourself at http://www.markit.com look for “indices” and snoop around

  14. Ross commented on May 1

    Thank you God and Dennis Gartman.

    Long tech and short commodities, FINALLY.

    It will only last for a month or two but ‘stuff’ on sale with pending hotted up inflation is a gift not to be ignored.

    When, not if, the Fed caves and the funds rate is 1%, we may finally get the commodities bubble of all bubbles.

    So looking foreward to rice wars I think I’ll top off my diesel and LPG tanks.

  15. Eric Davis commented on May 1

    Brian Westbury-

    I just think he is lying…. I think he knows we are in a recession, but what he also knows is that the fed cuts are making it worse.

    and his thesis about how inflation is a long drawn out process, and how you can’t just turn it off suddenly by a 2 year series of fed hikes is spot on….. SPOT ON!!. The damage they do with every cut will take 6 months longer to get it under control.

    I just think he is being dis-engenuous… in order to get what he thinks the market needs…. Less Fed Cuts.

    Ja’Cuse a Liar on wall-street!!!!(in my worst American Pho-french accent)

  16. Will G commented on May 1

    My firm has done some work with this survey as a contrary indicator. Had to smooth the data to reduce the volatility. Worked much better in the 90’s. Based on our measure it is currently neutral but approaching excesive optimism.

  17. michael schumacher commented on May 1

    Steve B-

    Both of them???

    Nor am I….this is just another chinese liquidity injection…..

    Honestly how these F!@#$% get away with this is really friggin’ demoralizing.

    Volume,volume,volume……it’s made little difference to this point when they can just go get more money and buy each other’s stocks day after day after day.

    Realistically they are taking away the ability to do a rationale job in this market.

    Ciao
    MS

  18. Eric commented on May 1

    And this move after Doug Kass professes yesterday that he’s gone “All In” short.

  19. MarkTX commented on May 1

    MS said,
    “Realistically they are taking away the ability to do a rationale job in this market.”

    Given the back drop of the US “System” – political, financial, workplace, religion, etc.

    It seems to me that this is not coincidence, but one of the main goals.

  20. Steve Barry commented on May 1

    Hang in MS…QID is screaming buy here…you can’t be squeezed when all AAPL shorts could cover in about 4 hours of average volume. The whole bounce from March is on pathetic volume. Wait till volume spikes…it will eventually. I’m with Dougie Kass.

  21. blin commented on May 1

    Today is the first day that I have considered going short. We are at the levels that I eyeballed about a month ago. I wasn’t sure if we would get to these levels, but now that we did, I’m eyeing multiple positions.

    Although, there have been no sell signals yet. I have a ‘bear plan’ that will blanket the short side of the market until the end of the year. Obviously I will abort my plan if no sell signals are triggered, but I just can’t resist. These levels are just too juicy.

    I just got my first partial fill.

    BTW, the first day of the month is usually the strongest. We are definitely seeing that today.

    Remember, the major trend is still down.

  22. pclema commented on May 1

    The market has decided that the FED will backstop the most vulnerable sector, the financials so they are going up now. It has also decided that the oil/gold commodity play is over at least for now. If the economy keeps going into the crapper it will have to turn some day but not yet. What disturbs me is that in the 2000 tech bust the fed was able to backstop real estate effectively — housing prices kept going up in the face of increasing unemployment. Maybe this time they will be effective in proping up the stock market in the face of the real estate collapse. Can’t let both go into the tank at once!

  23. Unsympathetic commented on May 1

    Does anybody have access to show a history of this indicator?

    I’d tend to think this is similar to the NAR “discussing the possibility” of a rise in house prices.. if someone’s money is made when X rises in price, i have a very hard time trusting their impartial analysis of thing X.

  24. Didn’t I Tell You to Cover ASAP commented on May 1

    I use the surveys and was screaming here a month ago that it was a huge buying signal and you need to cover ASAP, but you called me “clueless”. I guess you prefer making investment decisions based on your opinionated and “non-clueless“ NYT headlines.

    By the way, my evil brother Blind Bearish Squirrels and I also called on this blog:
    1. The bottom at S&P 1285 (when you considered going “crazy short”)
    2. Euro dollar top at $1.60
    3. Oil top at $115
    4. No recession

  25. Byno commented on May 1

    Barry,

    Seriously, every single produced survey, in addition to every single publicly followed indicator (MACD, RSI, Moving averages) will eventually succumb to Strong-form efficiency. Doesn’t mean I believe in EM Hypothesis either, but AAII was never a very good contrary indicator to trade from in the first place, and now that everybody and their third cousin knows about, I’d surmise that you’d do much worse than buy and hold using it (I’m not suggesting you are, I’m just trying to caution anyone who might get a wild hair).

  26. Woodshedder commented on May 1

    Blin, as of today, the primary downtrend line is broken to the upside, at least on the Dow and S&P. I haven’t charted the $COMP yet.

  27. SteveC. commented on May 1

    Woodshedder…Downtrend broken now? My suggestion is to stop using trendlines. They don’t work. My system went positive on the market 5 weeks ago. I’ll be looking for the exit soon… Today had the feel of everyone jumping in with both feet, and that’s usually not the time to be bullish.

  28. blin commented on May 1

    Woodshedder,

    I am not not talking about a downtrend, but the primary trend. You have to figure out that a poke through a trendline is not a reversal or a buy signal.

    That’s all I have to say.

    Battles will rage on, all of us have an opinion. We all think we are right.

    Risk management will be the key to everyones success.

    Good luck to all!

  29. dug commented on May 1

    I looked at all of the surveys over their entire history a decade ago and concluded they were interesting background information for judging how many people were likely to get caught wrong footed by surprises and for a general sense of the mood, but not tradeable numbers simply because they tell you nothing about timing since people can always get more bearish or more bullish for quite some time.

    Talk is cheap so sentiment measures that involve money like options volume and PC ratios are the ones that work, and I tend to count things like breadth, highs and lows, percent above and below an MA, % overbought and oversold, etc. in the sentiment category too. They do a good job of telling you how many nuts have left the fruitcake.

  30. flipper commented on May 2

    Barry, how to look up fund manager’s cash in bloomberg terminal?

Read this next.

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