Despite the big rally, it's hard to see who's buying
-
Jason Goepfert
Published: 2020-05-08 at 11:00:00 CDT
The latest survey of individual investors from the fine folks at the American Association of Individual Investors (AAII) showed a big drop in optimism. It's not just that one survey - several others are also showing tepid sentiment at best.
Our Backtest Engine shows that following any week when the Bull Ratio (Bulls / (Bulls + Bears)) was below 32%, forward returns in the S&P 500 were consistently positive.
What's outstanding about the current week's reading is that it isn't coming after a big decline. Quite the opposite.
There has never been a period when optimism was so low after such a big rally. Out of the 54 times when the S&P 500 showed a gain of 10% or more over a 7-week period, not one of them (until this week) saw more than 50% of respondents consider themselves bearish.
The only times more than 40% of respondents were bearish were December 1990 and a few weeks from April - August 2009.
This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.
We also looked at:
- News sentiment is nearing the most pessimism in 35 years
- Hedge funds don't seem to be levering up
- Fund flows continue to be weak into equities
- Rydex traders are still showing pessimism
- Consumers' outlooks on stocks are still tepid
- The VIX Term Structure hit a 50-day low even while most stocks are still below their 200-day moving averages
- Optimism on XLK is extremely high
- The Nasdaq keeps moving by +/- 1%, nearing the most such moves over a 2-month period
- The Nasdaq/S&P 500 ratio is well above its 50-day average
- Canadian stocks keep rising
Related Posts:
- Consumers are buying stuff, but not stocks
- Despite records, consumers aren't very optimistic
- AAII aye aye
- Fund managers are taking a record level of risk
- Newsletter writers are fully risk-on
Tagged As:
The post titled Despite the big rally, it's hard to see who's buying was originally published as on SentimenTrader.com on 2020-05-08.
At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.
Follow us on Twitter for up to the minute analysis of market action.
Follow @sentimentrader