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Strategies & Market Trends : Investor sentiment surveys - a technical indicator
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To: chester lee who wrote (7)4/3/1997 10:52:00 PM
From: Q.   of 167
 
Here's the latest AAII survey. Look at what happened on 2/28/97 and
5/31/96 -- both just weeks before big corrections -- the bullish
sentiment exceeded 60%. And the two-week average was in the mid 50's.
Before 1996, there were only two other incidents, around Christmas
1992 and August 1987. Christmas 1992 didn't turn into a correction,
but we all know what happened in the Fall of '87. So these extreme
bullish levels are very rare. It just happens that we had one in late
February.

I don't put any faith in most TA -- all that head and shoulders stuff
is nonsense. But there is something behind investor sentiment. When it
gets to an extreme state of bullishness, that means everybody who was
going to buy has already bought. Rather than new cash gradually
flowing into the market, it starts coming in too fast, leaving none
for later -- no fuel left for the fire. Likewise with extreme
bearishness and selling -- everybody who is going to sell already has
when the bearish sentiment reaches extraordinary levels.

Here's the data for just a couple of years:

S&P 500
Percent Percent Percent Weekly
Date Bullish Neutral Bearish Close
================================================
04-04-97 29% 40% 31%
03-28-97 27% 40% 33% 773.88
03-21-97 36% 42% 22% 784.10
03-14-97 34% 36% 30% 793.17
03-07-97 43% 37% 20% 804.97
02-28-97 63% 22% 15% 790.82
02-21-97 44% 36% 20% 801.77
02-14-97 45% 37% 18% 808.48
02-07-97 47% 29% 24% 789.56
01-31-97 51% 33% 16% 786.16
01-24-97 37% 41% 22% 777.56
01-17-97 42% 32% 26% 776.17
01-10-97 36% 39% 25% 759.50
01-03-97 43% 33% 24% 748.03
12-27-96 37% 33% 30% 756.79
12-20-96 33% 28% 39% 748.87
12-13-96 40% 28% 32% 728.64
12-06-96 41% 26% 33% 739.60
11-29-96 52% 27% 21% 755.00
11-22-96 43% 30% 27% 748.73
11-15-96 37% 34% 29% 737.62
11-08-96 26% 45% 29% 730.82
11-01-96 37% 29% 34% 703.77
10-25-96 42% 33% 25% 700.92
10-18-96 39% 36% 25% 710.82
10-11-96 38% 36% 26% 700.66
10-04-96 40% 31% 29% 701.46
9-27-96 34% 39% 27% 686.19
9-20-96 28% 41% 31% 687.03
9-13-96 26% 46% 28% 680.54
9-06-96 29% 35% 36% 655.68
8-30-96 28% 43% 29% 651.99
8-23-96 28% 46% 26% 667.03
8-16-96 43% 37% 20% 665.21
8-09-96 27% 42% 31% 662.10
8-02-96 29% 38% 33% 662.49
7-26-96 30% 32% 38% 635.90
7-19-96 29% 45% 26% 638.73
7-12-96 40% 35% 25% 646.19
7-03-96 32% 44% 24% 657.44
6-27-96 42% 41% 17% 670.63
6-21-96 42% 32% 26% 666.84
6-14-96 49% 28% 23% 665.85
6-07-96 47% 28% 25% 673.31
5-31-96 61% 29% 10% 669.12
5-23-96 51% 35% 14% 678.51
5-17-96 37% 40% 23% 668.91
5-10-96 46% 38% 16% 652.09
5-3-96 48% 31% 21% 641.63
4-26-96 28% 40% 32% 653.46
4-19-96 36% 38% 26% 645.07
4-12-96 40% 42% 18% 636.71
4-5-96 40% 43% 17% 655.86
3-29-96 45% 31% 24% 645.50
3-22-96 47% 31% 22% 650.62
3-15-96 36% 35% 29% 641.43
3-08-96 44% 28% 28% 633.50
3-01-96 45% 28% 27% 644.37
2-23-96 49% 22% 29% 659.08
2-16-96 54% 21% 25% 647.98
2-09-96 53% 31% 16% 656.37
2-02-96 54% 31% 15% 635.84
1-26-96 36% 40% 24% 621.62
1-19-96 42% 29% 29% 611.83
1-12-96 NA NA NA 601.81
1-05-96 55% 18% 27% 616.71
12-29-95 46% 34% 20% 615.93
12-22-95 48% 28% 24% 611.96
12-15-95 51% 23% 26% 616.34
12-8-95 48% 28% 24% 617.48
12-1-95 51% 30% 19% 606.98
11-22-95 48% 18% 34% 598.40
11-17-95 46% 31% 23% 600.07
11-10-95 49% 35% 16% 592.72
11-3-95 47% 34% 19% 590.57
10-27-95 46% 33% 21% 579.70
10-20-95 47% 32% 21% 587.46
10-13-95 41% 30% 29% 584.50
10-6-95 39% 37% 24% 582.49
9-29-95 42% 27% 31% 584.41
9-22-95 46% 25% 29% 581.73
9-15-95 46% 32% 22% 583.35
9-8-95 37% 36% 27% 572.68
9-1-95 38% 42% 20% 563.84
8-25-95 35% 28% 37% 560.10
8-18-95 36% 43% 21% 559.21
8-11-95 40% 30% 30% 555.11
8-4-95 38% 34% 28% 558.49
7-28-95 41% 26% 33% 562.93
7-21-95 43% 30% 27% 553.62
7-14-95 44% 18% 38% 559.89
7-7-95 35% 34% 31% 556.37
6-30-95 35% 28% 37% 544.75
6-23-95 48% 21% 31% 549.79
6-16-95 36% 31% 33% 539.83
6-9-95 44% 25% 31% 527.94
6-2-95 39% 34% 27% 532.51
5-26-95 44% 26% 30% 523.68
5-19-95 42% 23% 35% 519.19
5-12-95 44% 26% 30% 525.55
5-5-95 42% 27% 31% 520.12
4-28-95 52% 29% 19% 514.71
4-21-95 37% 27% 36% 508.49
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