The latest American Association of Individual Investors (AAII) sentiment survey numbers were released yesterday, and amazingly, were virtually unchanged from the week prior. For the second week in a row, bearish investors remain at 17%, still near decade-long lows. This struck me as a rare situation, so I decided to investigate further.
I set out to uncover how the market reacted when there were two or more consecutive weeks of bearish investor percentages this low, using bears below 19% as the control figure (thus allowing for roughly 20% standard deviation in the data figures). After combing through 562 weeks of AAII data by hand, I discovered that since the 2000 market peak, there have only been 12 other occurrences of this scenario. Interestingly, the current back-to-back reading of less than 19% bearish is the first occurrence we've seen in almost six years. So indeed, this is a rare set up.
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