Thursday, December 19, 2019

Individual Investor Sentiment Swings To Bullishness

Today's AAII release of the Sentiment Survey reported a 6.5 percentage point jump in individual investor bullishness. This increase came mostly from the bearish category as it declined 5.6 percentage poitns. With the bullishness reading now reported at 44.1%, this is above the long term bullish average of 38.0%. The plus one standard deviation above the average is 48% so individual investors are approaching an overly bullish level.

Another sentiment measure showing extreme bullishness is CNN Business' Fear & Greed Index which is in the 'Extreme  Greed' range at 89. One year ago, this indicator measure was in the Extreme Fear rage at 8. The Fear & Greed Index is a composite of seven different inputs and all but one, the market volatility input (VIX), are in the extreme greed range.

With both the AAII Sentiment Survey and CNN Business Fear & Greed Index being contrarian indicators, these levels are at or near ones where investor might expect a market pullback. Given the seemingly uninterrupted rise in the market over the last year, some pullback or consolidation would certainly be healthy for sustaining further positive market returns in the coming new year.

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