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Bulls Have Bears on the Run to Start 2012

NEW YORK ( TheStreet) -- Maybe it's that false sense of optimism that comes with a fresh calendar but the little guy is feeling pretty darn optimistic about stocks right now.

The latest weekly sentiment survey from the American Association of Individual Investors finds the level of bullishness among the organization's roughly 150,000 members at an 11-month high.

Thanks to a jump of 8.3 percentage points, the bull camp -- those who expect the S&P 500 to gain ground over the next six months -- swelled to 48.9% this past week, the highest reading since the week ended Feb. 10, 2010, and well above the long-term average of 39%.

Bearishness took a major turn lower, losing 13.7 percentage points to just 17.2%. That reading constitutes the lowest measure of pessimism about stocks since the week ended Dec. 23, 2010.

"It is also more than one standard deviation below the historical average of 30%, making this an unusually low reading," noted the AAII, which doesn't disclose how many of its members take the survey each week.

It got more crowded on the fence as well with the percentage of those saying stocks will stay flat for the next six months rising 5.4 percentage points to 34%, making for the second time in the past three weeks that neutral sentiment has come in above its long-term average of 31%.

The AAII also asked its members this week which group of stocks they expect to perform best in 2011, large-cap, mid-cap, small-cap or micro-cap. The majority are expecting large-caps to outperform "especially those that pay dividends," the organization said, adding that mid-caps were a "distant second" followed by small-caps.

"Dividends and safety matter," said one investor in response to the survey question. "Exposure to emerging markets can be attained through high-quality large-cap stocks."

Despite a mixed performance on Friday, the major U.S. stock indices are on pace to record modest gains in the first week of 2012, a good sign for believers in the January effect, the name given to the historical trend for a positive showing in the first month being indicative of gains for the full year.
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