AAII Bearish Sentiment Surges

The American Association of Independent Investors released its weekly poll of investor sentiment. Bullish sentiment fell to 48.23%, down from 51.20% last week and bearish sentiment surged to 29.79%, up from 21.60%. Investors who were neutral on the market came in at 22%.

This was a very bizarre report from the AAII since bearish sentiment rose dramatically despite a rising market environment, which is very rare. This indicates retailers were probably nervous going into the elections and the Fed meeting. From a contrary perspective this is slightly bullish and means that average investor does not trust this rally.

Frankly, I would be very cautious at this point regarding the AAII sentiment survey. It has been flashing a sell signal for about 6 weeks now and the market has continue to surge. I think QE 2 has distorted all market indicators.

Here is a short term chart of AAII sentiment

click charts for larger image

Here is a longer term chart which compares AAII bullish sentiment to the S&P 500

Here is a chart which compares AAII bearish sentiment to the S&P 500

Black Swan Insights

AAII Bearish Sentiment Surges