Thursday, May 05, 2011

Investor Sentiment Not Overly Bullish And The Presidential Election Cycle

This week's bullish investor sentiment level released by the American Association of Individual Investors came in at a not so bullish 35.46%. This is down from the prior week's bullishness level of 37.90%. The bull/bear spread narrowed to 3.6% versus 7.3% last week.

From The Blog of HORAN Capital Advisors
Source: AAII

The current week's bullishness reading is below the long term bullishness average of 39%. Investor should keep in mind that this one technical indicator is most accurate at extreme levels.

The strength of the market advance so far this year makes it not surprising that the market might experience a little consolidation. Also, for those interested in the presidential cycle, the third year of a president's term tends to be the best. The post I wrote on the presidential cycle in June of last year noted the strength of the market in Q4 of year 2, and in Q1 and Q2 of year 3. The average frequency of quarterly advances was over 80% in the three quarters noted previously.

From The Blog of HORAN Capital Advisors

From an economic perspective, recently released data points suggest a slow growth economic picture. Friday's non-farm payroll release could provide further confirmation of this slower growth view. At HORAN Capital Advisors, we continue to believe high quality large cap U.S. equities remain attractive in this environment and attractive from a valuation perspective. So outside the speculation in the commodity sector, the equity market's recent pullback is healthy and may afford investors an opportunity to build or add to equity positions.

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