Investor Sentiment More Bearish

This past week's investor sentiment report by the American Association of Individual Investors (AAII) indicated investor bullish sentiment continues to decline. The bullish sentiment reading declined 6.42 percentage points to 35.42%. Individual investor sentiment is a contrarian indicator and is most predictive of future price action when the bullish sentiment is at extremes. If individual investors indicate a low level of bullishness, this would be one indication the equity market could be approaching a bottom. Although the current reading is not at an extreme, investors appeared to become less bullish as the market pulled back from its recent high reached in mid-September.

From The Blog of HORAN Capital Advisors

Data source: AAII

Additionally, as the below Google Trends graph shows, the search on the phrase "stock market correction" has increased significantly from September into October. Given the market's turnaround Thursday and continued into Friday, maybe this recent 4.6% correction will be the extend of the pullback as we have seen from the market over the past three years.

From The Blog of HORAN Capital Advisors