AAII Sentiment Survey Results For Frame Ended 11 November 2015
$DIA, $SPY, $QQQ
The AAII Investor Sentiment Survey measures the percentage of individual investors who are Bullish, Bearish, and Neutral on the stock market for the next 6 months; individuals are polled from the ranks of the AAII membership weekly. Just 1 vote per member is accepted in each weekly voting frame.Data represents what direction members feel the stock market will be in the next 6 months.
AAII Investor Sentiment Survey Update
Bullish: 34.3%, –4.7
Neutral: 42.7%, + 0.3
Bearish: 23.0%, + 4.4
Bullish: -4.7
Neutral: +0.3
Bearish: +4.4
Long-Term Average:
Bullish: 38.73%
Neutral: 30.97%
Bearish: 30.29%
Commentary
More than 40% of investors describe their 6 month outlook for stock prices as “Neutral” for a 2nd week running, according to the latest AAII Sentiment Survey. Optimism pulled back for a 2nd consecutive week, Pessimism rebounded.
Bullish sentiment
Expectations that stock prices will rise over the next months, fell 4.7 percentage points to 34.3%. The drop puts optimism back below its historical average of 39.0% for the 1st time in 3 weeks.
Neutral sentiment
Expectations that stock prices will stay essentially unchanged over the next 6 months, moveded up 0.3 percentage points to 42.7%. The increase keeps Neutral sentiment at its highest mark since 6 August 2015 (44.0%). This is the 9th straight week and the 43rd week this year that Neutral sentiment is above its historical average of 31.0%.
Bearish sentiment
Expectations that stock prices will fall over the next 6 months was up 4.4% to 23.0%. The increase ends 5 weeks running with falling pessimism. Even with the increase, Bearish sentiment remains below its historical average of 30.0% for the 6th straight week, the longest run since a 9-week streak between 9 April and 4 June 2015.
The last time Neutral sentiment was above 40% on consecutive weeks was the 16-week period of 9 April through 22 June 2015. Readings above 39.7% are unusually high and have been associated with above average returns over the following 6 and 12-month frames.
Bullish sentiment is exceeding Bearish sentiment by a margin of at least 10% for the 4th week running. This is the 1st time the survey’s Bull-Bear spread has shown such a positive differential for 4 straight weeks since 12 February through 5 March 2015.
The decline in optimism occurred as the S&P 500 pulled back after having risen over the past 4 weeks.
There was also some reversion to the mean, as pessimism fell to an unusually low level last week. October’s upward price momentum, seasonal trends and potentially better-than-forecast Q-3 earnings surprises have had a positive impact.
On the other hand, some AAII members are not convinced that the recent upward momentum will continue and are concerned about global and international events particularly China as well as global economic weakness, US monetary policy, US politics and the pace of US economic growth.
This week’s special question asked AAII members to share their thoughts about the stock market’s rebound off of late September/early October lows.
27% of respondents said the rebound was either expected or not surprising. Many thought stocks have become oversold. About 17% said they are unsure if the current rally will continue. An additional 15% do not expect the rally to continue.
Several of respondents used the words “Bear market rally” to describe the recent rebound. About 7% think the market could be relatively range-bound over the foreseeable future. Approximately 5% said they were surprised by the speed of the rebound.
The US Fed was mentioned by 15% of respondents.
Some believe postponement of a rate hike at the last meeting helped the market to rebound, others say current monetary policy and the threat of a rate hike occurring at the December meeting is hurting stocks or is causing uncertainty to continue.
By Charles Rotblut, CFA, AAII Journal
Paul Ebeling, Editor
HeffX-LTN
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