The AAII Sentiment Survey for the Frame Ended 19 October 2016

The AAII Sentiment Survey for the Frame Ended 19 October 2016

The AAII Sentiment Survey for the Frame Ended 19 October 2016

$DIA, $SPY, $QQQ, $VXX, $OIL

The AAII Investor Sentiment Survey measures the percentage of individual investors who are Bullish, Bearish, and Neutral on the US stock market for the next 6 months,

The AAII Investor Sentiment Survey has become a widely followed measure of the mood of individual investors. The weekly survey results are published in financial publications and are widely followed by market strategists, investment newsletter writers and other financial professionals.

Data represents what direction members feel the stock market will be in next 6 months.

Investor Update: Optimism fell to a low mark not seen since last June.

This week’s results.

Bullish: 23.7%, – 1.7 pts
Neutral: 38.4%, – 2.4 pts
Bearish: 37.8%, + 4.1 pts

Historical averages:

Bullish: 38.5%
Neutral: 31.0%
Bearish: 30.5%

Commentary

Optimism among individual investors about the short-term direction of stock prices fell to an unusually low mark, one not seen since last June.

The latest AAII Sentiment Survey also shows an increase in Pessimism and a decrease in the percentage of investors describing their outlook as Neutral.

Bullish sentiment

Expectations that stock prices will rise over the next 6 months, declined 1.7% to 23.7%. Optimism was last lower on 22 June 2016 (22.0%). This week’s fall puts Optimism below its historical average of 38.5% for the 50th week running and the 83rd out of the past 85 weeks.

Neutral sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, fell 2.4% to 38.4%. This is a 4-week low. Nonetheless, Neutral sentiment is above its historical average of 31.0% for the 38th straight week.

Bearish sentiment

Expectations that stock prices will fall over the next 6 months, rose 4.1% to 37.8%. The increase puts Pessimism at a 4-week high and above its historical average of 30.5% for the 6th time in 8 weeks.

This week’s Bullish sentiment reading ranks as the 104th lowest reading out of the more than 1,500 weekly results recorded during the 29-year history of the AAII weekly survey.

Since reaching 35.6% in mid-August, Optimism has declined during 8 out of 9 weeks. Large-cap stock prices are only down modestly since then, and small-cap stocks have been essentially flat over this period. Both have trended Southward this month. The lack of new market highs may be playing a role in dampening Optimism.

Also causing concern for some investors is the possibility of the stock market experiencing a larger decling, valuations, the November elections, global economic uncertainty and the pace of corporate earnings growth.

Giving other individual investors reason for Optimism are the perceived lack of investment alternatives, corporate earnings, low/stable energy prices and sustained but slow economic growth.

This week’s special question asked AAII members about their perception of the current state of the US housing market.

The 2 largest groups of respondents were nearly evenly split, and opinions overall were mixed., as follows:

  1. 27% of described the housing market as either being overvalued, weak or otherwise at risk of weakening.
  2. 25% described the housing market as being good and/or continuing to do well until interest rates increase.
  3. 11% said housing is growing slowly.
  4. 7% think housing is in a bubble.
  5. 6% believe the housing market is steady.

By Charles Rotblut, CFA

Paul Ebeling, Editor

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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