Individual Investors Are An Emotional Wreck And It Is Astonishingly Bullish

aaiisurvey0410

The latest AAII Sentiment Survey again indicates extraordinary reactivity to price.

Last week, the major equity indices pulled back a bit with the S&P 500 losing 1.3% (intraday high to low), the $DJIA a little over .5%, the Nasdaq 2% & the Russell 2000 a little more than 3%.

In response to this shallow correction, however, the sentiment survey shows a huge spike in bearish sentiment of +26.3% from 28.2% to 54.5% while bullish sentiment decreased 16.2% to 19.3%.

While I have been writing and speaking extensively about the high sentiment reactivity for a while now and how it bouys equity prices, I am still surprised by the extremity of it evident in these numbers.

In an environment where sentiment shifts so much on such modest declines, the shift acts like a put or hedge against lower prices. Individual investors are an emotional wreck and it is astonishingly bullish.

Note: For all the latest on the AAII numbers and analysis I highly recommend following Charles Rotblut on StockTwits. He is a VP at AAII, does a great job covering the numbers and much more and he will answer your questions insightfully on the stream.

Related:

AAII Sentiment Survey

The Freudian Put

Behavioral Finance and the Freudian: An Interview with StockTwits’ Phil Pearlman

$SPY $IWM $DIA $QQQ

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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