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Strategies & Market Trends : Investor sentiment surveys - a technical indicator
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To: James F. Hopkins who wrote (80)7/3/1997 11:38:00 AM
From: Q.   of 167
 
James, the most recent surveys can be found in post 76 or thereabouts.

The correction I've been anticipating based on the bullish sentiment doesn't seem to be materializing, BTW. I don't know whether that's because there won't be a correction, or whether it will simply be a few weeks before it starts.

Here's a review of the three previous occasions when the bullish sentiment exceeded 55% (2 week average AAII).

There were three incidents. In each, the market slumped 2% - 4% after the peak in the bullishness. Thereafter, there was a delay of 6 weeks before the crash of 87 and a delay of 4 weeks before the correction of 1996. In 1992 the market simply stayed flat, and 10 weeks after the 55% level was breached the S&P 500 was exactly where it was before.

This time around, the 55% level was hit on 6/27. Four weeks would be July 25. Six weeks would be Aug. 8. Already, though, things are a little different. The market is a couple % higher now than it was a week ago when the 55% level was exceeded, and that didn't happen in the three cases before.

I don't know what will happen next, of course. Based on the very limited 10-year history, there is a 2/3 chance of a correction and a 1/3 chanceÿof the market being flat. However it isn't possible to be confident in this because there isn't much statistical confidence when there are only three historical incidents entering into the empirical test.
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