AAII Investor Sentiment Plummets--Contrary Buy Signal?

       The American Association of Individual Investors released its weekly sentiment survey which showed a large decline in investor bullishness as wild market fluctuations whipsawed investors. Bullish sentiment fell to 20.74% from 30.11%, but bearish sentiment rose 49.47% from 42.47% during the previous week. The percentage of investors who described themselves as neutral on the stock market rose to 29.79% from 27.42%, according to the poll. The historical average of investor bullishness is 39%. With invesor bullishness at 20%, this would be a contrary buy signal because retail investors are usually wrong.

The chart below shows how sentiment has changed over the last 3 months:


Below is a 2 year chart of the AAII Sentiment Survey. You will notice that major bottoms usually coincide with a AAII bearishness number north of 50%.


Black Swan Insights


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