The AAII Sentiment Survey for the Frame Ended 26 October 2016

The AAII Sentiment Survey for the Frame Ended 26 October 2016

The AAII Sentiment Survey for the Frame Ended 26 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: 24.8%, + 1.0 pts
Neutral: 41.2%, + 2.7 pts
Bearish: 34.1%, – 3.7 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 is below 30% for the 10th week running. Neutral sentiment rebounded, while Pessimism pulled back.

Bullish sentiment

Expectations that stock prices will rise over the next 6 months, rebounded by 1.0% to 24.8%. Optimism is below its historical average of 38.5% for the 51st straight week and the 84th out of the past 86 weeks.

Neutral sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, rose 2.7% to 41.2%. The increase follows what had been a 4-week low. It also keeps neutral sentiment above its historical average of 31.0% for the 39th straight week.

Bearish sentiment,

Expectations that stock prices will fall over the next 6 months, pulled back by 3.7% to 34.1%. Even with the decline, Pessimism is above its historical average of 30.5% for the 7th time in 9 weeks.

As noted above, the percentage of individual investors describing their short-term outlook as “Bullish” has now been below 30% for 10 weeks running. During 6 of those weeks, optimism has been below 28.0%, the breakpoint between the normal range of readings and unusually low readings.

Not surprisingly, the S&P 500 and the Russell 2000 have both declined over this frame.

Causing concern for individual investors is the lack of new market highs, the possibility of the stock market experiencing a larger drop, 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, albeit slow, economic growth.

This week’s special question asked AAII members how the inability of stocks to retest or rise above their Summer highs is influencing their outlook.

  1. 24% said that the price action has caused them to be pessimistic or cautious. Conversely, a similar number of respondents said that their outlook is not being influenced by the inability of stocks to rise to new highs or that the recent price action is having little influence on their outlook. Several of these respondents described themselves as long-term investors.
  2. 13% of respondents are waiting to see the results of the election before setting short-term expectations.
  3. 11% are waiting for a catalyst to drive stocks in one direction or another.
  4. 9% view the lack of new highs as a positive sign.

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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