Thursday, January 03, 2008

Pessimistic Investor Sentiment

Individual investors continue to be pessimistic about the market as noted in the Sentiment Survey from the American Association of Individual Investors. In today's sentiment survey release, the bullish sentiment level declined to 25.71% versus last week's 30.0% bullishness level. The bull/bear spread widened to a minus -29.53%. This compares to last week's bull/bear spread of -20%. Additioanlly, the level of bearish reach 55.24%. This is the highest bearishiness level since November 1990.

(click on chart for larger image)

From a sentiment perspective, this contrarian indicator suggests we are near a level where the market could experience a technical bounce. On the other hand, the percentage of S&P 500 stocks trading above their 50-day moving average is not quite at an oversold level as noted in the chart below.

(click on chart for larger image)

percentage of S&P 500 stocks trading above 50-day moving average

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