AAII Sentiment Survey: Bearish Sentiment Surges to 54.5%
Posted on April 11, 2013 | AAII Survey
Bullish sentiment plunged to levels not seen since the end of the last bear market, while bearish sentiment posted its third largest weekly spike in the history of the AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 16.2 percentage points to 19.3%. This is the lowest level of optimism recorded by the survey since March 5, 2009. The historical average is 39%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, dropped 10.1 percentage points to 26.2%. This is a five-week low. The historical average is 30.5%.
Bearish sentiment, expectations that stock prices will fall over the next six months, spiked upward by 26.3 percentage points to 54.5%. This is the highest pessimism has been since July 8, 2010.
The 19.3-point plunge in bullish sentiment was the largest one-week drop since optimism fell by 17.6 percentage points on November 18, 2010. This week’s drop is also the 34th largest in the history of the survey and the 66th largest overall weekly change. The AAII Sentiment Survey started in 1987.
The 26.3-percentage point rise in bearish sentiment was exceeded only by a 26.7-percentage point rise on July 3, 2003 and a 30.0-percentage point rise on March 30, 2000. This week’s change is also the fifth largest in the survey’s history. Pessimism fell by 29.2 percentage points on April 6, 2000, and by 27.3 percentage points on June 26, 2003.
A total of 145 AAII members took the survey this week. This is down from the three-month average of 330 responses. A weekly “reminder” email normally sent to a sample of our members was unintentionally not sent this week. Previous drops in the number of respondents on a given week have not resulted in the magnitude of change recorded in this week’s survey, however. Furthermore, 145 is not an abnormally low number of responses for the survey.
We are not seeing any specific signs that would suggest why pessimism surged and optimism fell so much. The disappointing jobs report could have played a role. We can say that some members have previously expressed concern that stock prices have moved too far, too fast and are now due for a pullback.
At current levels, bearish sentiment is at an extraordinarily high level (more than two standard deviations above its historical average) and bullish sentiment is near an extraordinarily low level. (A bullish sentiment reading below two standard deviations would be 17.9%.) Such readings have historically been a contrarian signal. Though there is a correlation with between extraordinary sentiment readings and market reversals, as is the case with any single market indicator, the correlation is not perfect. Therefore we would consider other indicators and factors before making any judgment on the short-term direction of stock prices.
This week’s special question asked AAII members if the rhetoric from and the actions by North Korea are influencing their short-term outlook for stock prices. More than 80% of respondents said no, the terse language and actions from North Korea are not impacting their sentiment. A few members said it was having some impact, but also noted that other macro factors are also influencing their sentiment toward U.S. stocks.
Here is a sampling of the responses:
- “No. I think most investors assume that North Korea is just making threats to get something of value from the rest of the world.”
- “Not really. I think most people see this as ‘business as usual’ for a new dictator.”
- “Not until an actual armed conflict occurs.”
- “Yes, but biggest issue at present is that this market needs rest.”
This week’s AAII Sentiment Survey results:
- Bullish: 19.3%, down 16.2 percentage points
- Neutral: 26.2%, down 10.1 percentage points
- Bearish: 54.5%, up 26.3 percentage points
- Bullish: 39.0%
- Neutral: 30.6%
- Bearish: 30.6%
The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.) The survey and its results are available online at: http://www.aaii.com/sentimentsurvey
The Relative Strength Index (RSI)
Posted on April 11, 2013 | Computerized Investing
Identifying overbought and oversold conditions with a momentum indicator widely used by traders and short-term investors.
Sell of the week 4/10/2013
Posted on April 10, 2013 | Podcast
AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why J.C. Penney Company (JCP) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.
Audio url: Sell of the week
BUY OF THE WEEK 4/9/2013
Posted on April 9, 2013 | Podcast
AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Nu Skin Enterprises (NUS) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.
Audio url: Buy of the Week
WATCH VIDEO ON HOW TO ISOLATING DATA WITH VIEWS
Posted on April 9, 2013 | Stock Investor Pro
The Stock Investor Pro program currently contains two screens based on William O’Neil’s CAN SLIM approach. The first screen, listed as *O’Neil (CANSLIM) in SI Pro, is based on William O’Neil’s investing methodology outlined in the second edition of his book, “How to Make Money in Stocks.” The second screen, called *O’Neil (CANSLIM Revised), was updated to reflect the third edition of the book. Though both screens have enjoyed strong price performance over our backtesting period, AAII’s original O’Neil CAN SLIM really took off and has been one of our top-performing screens from 1998 through 2012. Recently, however, the screen has produced very few passing companies, making it increasingly difficult to utilize this screen in a balanced investing strategy.
State-Based Exchange-Traded Funds
Posted on April 9, 2013 | Investing
Exchange-traded funds (ETFs) are continuing to prove themselves as ever-present and almost chameleon-like in their ability to take on many new forms as a perceived need arises. The latest additions to the ETF world are state-based ETFs.
AAII WEEKLY FEATURES 4/9/2013
Posted on April 9, 2013 | Weekly Features
This week’s AAII Weekly Features has been updated.
View this week’s Top AAII Articles, Featured Stock Screen and Member Question.
DIVIDEND INVESTING ALERT FOR THE WEEK ENDING
Posted on April 5, 2013 | Dividend Investing
As we explain in the April Monthly Report, this change swaps a stock with very modest dividend increases with one that has strong dividend growth.
STOCK SUPERSTARS ALERT FOR THE WEEK ENDING 4/5/2013
Posted on April 5, 2013 | Stock Superstars Report
Stock Superstars alert for the week ending 4/5/2013 updated.
Life Cycle Funds
Posted on April 5, 2013 | Investing
Life cycle funds are marketed as a maintenance-free way for individuals to invest for retirement. They were created under the assumption that many individuals needed a one-stop investment vehicle that properly rebalances their portfolios over their investment lives, as their investment needs change. Typically, in an individual’s younger years, riskier but higher-return potential assets should be emphasized, but as the individual approaches retirement, the percentage commitment to these types of investments should be gradually reduced. Life cycle funds are designed to follow this investment pattern.
At first, life cycle funds were limited to mutual funds, but over the years, life cycle exchange-traded funds ETFs have been created.