Wednesday Sentiment
Sentiment analysis is an important component when following the markets. If too many people are bearish, there aren't enough sellers left, the balance tips to buyers and the market starts to advance. If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens.
One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.
The chart below shows four polls and their current sentiment levels. Keep in mind, sentiment analysis is not a science and only provides very general information. Sentiment is not a signal to take action, but is a warning about the current state of the markets. There have been many occasions when bullishness reached high levels well before the market started to weaken.
The current sentiment readings are mixed but show a shift to more neutral levels from the prior week. The fact that the polls show a range where some still show skepticism while others are bullish points to a generally neutral level of overall sentiment.
The II survey ticked up slightly but is still below prior levels of bullishness registered when the markets were at prior cycle peaks. The AAII survey moved up from a neutral level to a moderately high level of bullishness.
The Birinyi blogger poll is new so there is not much history to judge bearish and bullish levels, but it shifted back down to what appears to be a general level of skepticism which diverges from the II and AAII surveys.
Market Vane remains just above at a level of general optimism. This poll has a different range than the others. In the bull market that began early 2003, skepticisim is registered near or below the 55% level, and optimism is registered near or above the 70% level.
***All charts and comments are intended for educational and discussion purposes only. No investment recommendations are being offered.***
