There are a number of sentiment indicators pointing towards in an increase in investor pessimism. This is a good sign and not surprising given that the markets have pulled back over the past week and are threatening to retest the March lows.
The most recent AAII (American Association of Individual Investors) survey showed a 16% increase in bearishness and a 12% decline in bullishness among members. Currently, 54% of AAII members are bearish which is near the March 2008 levels.
The weekly Investors Intelligence Survey of newsletter writers has bullish sentiment at 43%. Bearish sentiment is at 32.6%. When only 35% of the newsletters show bullish sentiment, it has tended to historically coincide with market bottoms so this is positive from a contrarian point-of-view.
Other positive indicators that are bullish for stocks include;
- High Short Interest on the Nasdaq and NYSE
- Corporate Insider Buying is still positive
- Public Short Selling (by smaller investors)
- Liquidity Premium is high (investors look towards ETF's instead of individual stocks) since they are nervous
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