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Strategies & Market Trends : Investor sentiment surveys - a technical indicator
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To: Q. who wrote (96)8/15/1997 5:49:00 PM
From: Q.   of 167
 
Well, we are in a correction now. At the close, the S&P 500 is down 7% from its peak 6 trading sessions ago.

The AAII sentiment index that came out today was essentially the same fairly high level, at 49%, as a week earlier. The latest survey probably reflects data accumulated several days ago, before there was much of a market drop. We shouldn't see a market bottom until the AAII sentiment drops to about 30% or below, if they are like the two previous corrections. One sentiment bottomed at 29%, the other at 26%.

Put-to-call ratios and the McClellan oscillator picked the bottom of the last two corrections with considerable precision, right to the very day. (That's better precision than the one or two-week accuracy that the sentiment surveys offered.) Yesterday those two indicators were a long ways away from indicating a bottom to the correction.
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