Sentiment Signals: Bulls and bears approach neutral levels

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The results of the latest AAII Investor Sentiment Survey show that the bullish and bearish sentiment readings have eased further from the previously extreme levels. For the week ended January 26, 2010, the bulls declined to 42.0% from 50.3% two weeks ago and the bears increased to 34.3% from 29.1%.

Nonetheless, bullish sentiment stayed above its historical average of 39% for the 21st consecutive week – the second longest streak in the Survey’s history since inception in 1987. Bearish sentiment climbed to its highest level of pessimism since September 2, 2010, marking only the fourth week since then that bearish sentiment has been above the historical average of 30%.

Sources: AAII Investor Sentiment Survey; Plexus Asset Management.

Wheras the AAII Survey focuses on individual investors, the Investor Intelligence Survey deals with financial newsletter writers. This survey measured sentiment over the same period as the AAII and indicated bullish sentiment dropping to 55.1% from 56.0% during the previous week – a reading somewhat below the October 2007 all-time high of 62.0%. The bears were down to 19.1% from 20.9%.

Although I do not have raw data going very far back for the Investors Intelligence series, the combined AAII and Investors Intelligence Surveys nevertheless make for interesting reading.

Sources: AAII Investor Sentiment Survey; Investor Intelligence Survey; Plexus Asset Management.

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