A surprising signal from the AAII Bull Ratio indicator

Key points:

• Despite the bull market in recent years and the major indexes standing near all-time highs, some key sentiment gauges continue to show significant doubt
• As a contrary signal, certain measures of the AAII Bull and Bear data have proven useful in identifying favorable times to hold stocks
• One such indicator recently fired a signal that typically occurs only after a bear market plays out
• The signal should be considered as weight of the evidence, and not as a standalone buy signal

AAII Bull and Bears: The never-ending battle

The AAII (American Association of Individual Investors) is a non-profit organization headquartered in Chicago and was founded in 1978. Their stated mission is: "assisting individuals in becoming effective managers of their own assets through programs of education, information, and research." It is affiliated with NAIC, the organization that helped so many investment clubs get started in the late 1990's.

Their niche market is individual investors, and not professional traders, pension funds, or anything else institutional. Their focus, and the focus of the great majority of their membership, is long-term fundamental analysis of sound companies using a very minimal amount of technical analysis for decision-making purposes.

The AAII sentiment survey is a weekly poll conducted by that organization that intends t