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Investor Sentiment Indicators Are Signalling an Uncommon Pattern Between Bulls and Bears

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This is a market of indecisive investors.

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In this week's sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment saw its largest weekly decline since the end of January, falling from 41.34% down to 36.78%, which is below the current bull market's average of 38.6%.  At the same time, however, bearish sentiment also declined this week, falling from 26.82% down to 26.15%. It seems investors cannot make up their minds.

When you look at the weekly sentiment figures from AAII, you can typically expect to see bullish and bearish sentiment move in opposite directions. It makes perfect sense when you think about it. If more investors are feeling bullish, the increase in bullishness has to come out of either the bearish or neutral camp. From time to time you do see bullish and bearish sentiment move in the same direction, but it is not entirely common. In the current bull market, for example, bearish and bullish sentiment have only moved in the same direction in a given week 17% of the time, so the fact that both bullish and bearish sentiment moved in the same direction is out of the ordinary.

With weekly moves in bullish and bearish sentiment being relatively uncommon, you can imagine that consecutive weeks where they move in the same direction would be rare. That's what makes the last few weeks so unique, as it marked the fourth straight week where both sentiment measures moved in the same direction. The last time we saw a similar streak where bulls and bears moved in the same direction for four straight weeks was more than 10 years ago in January 2004, and since the survey began in 1987 it has only happened six other times.


No positions in stocks mentioned.
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