Thursday, October 23, 2008

Bullish And Bearish Sentiment Gridlocked

Given the wide daily swings in the market, I am not surprised this week's sentiment survey by the American Association of Individual Investors shows an equal percentage of bullish and bearish investors: 38.74%. From a contrarian perspective, the sentiment indicator marks a market bottom when individual investors are the least bullish. The low 20% area or in ta reading in the teen range would be such an area.

Given the market weakness experienced since October of last year and a bullishness reading that has ranged in the 30-40% area, investors do not seem overly bearish. One would think the market would be acting better based solely on these investor sentiment readings. That raises the question-who is doing all the selling. When this period is evaluated at some point in the future, I would not be too surprised if much of the selling has been hedge fund and institutionally driven.

(click on table for larger image)

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