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Thursday, April 7, 2011

AAII Less Bullish

Individual investors are duly noted whenever they are on the wrong side of the market. In fact, their posture at any point in time is a widely used contra indicator. When they are positioned bullishly (i.e. for a rise in stock prices), many market timers take it as a negative sign, and vice-versa. And, that has happened over the past decades and has frequently been a major story. What doesn't get reported is when they get it right. And they got it right last year.

According to the Bullish Sentiment indicator of the American Association of Individual Investors (AAII), 45.3% of respondents were bullish 12 months ago. That compares to an historical average of 39%. The S&P 500 rose a bit more than 14% over the past 12 months.

Today AAII's Bullish Sentiment indicator stands at 36.0%, below the historical average but about 6% above the percent of respondents who are bearish. That leaves approximately 34% in the neutral camp.

What are you at this juncture - bullish or bearish?
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4 comments:

  1. ChadApril 7, 2011 at 10:34 AM

    I'm in the bearish camp based on somewhat high valuations and the potential for rising interest rates...however, I don't change my strategy based on what I think might happen in the near term. I'm staying the course.

    ReplyDelete
  2. DIY InvestorApril 7, 2011 at 11:07 AM

    @Chad I agree 100%. There are a lot of things out there to worry about but the market tends to climb (as they say) a "wall of worry". Make adjustments at the margin but stay with the overall plan.

    ReplyDelete
  3. MoneyConeApril 7, 2011 at 2:13 PM

    If it goes down, I'll be an accumulator. If it goes up, I'll rebalance!

    ReplyDelete
  4. DIY InvestorApril 7, 2011 at 3:00 PM

    @MoneyCone Great strategy for the long term!

    ReplyDelete