AAII Sentiment Survey

AAII Sentiment Survey

Source: American Association of Individual Investors

The American Association of Individual Investors' sentiment survey released on Thursday morning showed a spike in bullish sentiment and a decrease in bearish sentiment. For the week ended May 23, bullish sentiment came in at 61.9%. The week before, bullish sentiment stood at 51.8%. Bearish sentiment, meanwhile, dropped to 16.7% during the week ended May 23, from 18.8% the week before. Investors who consider themselves neutral dropped to 21.4% during the week ended May 23, from 29.4% the week before.

During the week ended May 23, the Nasdaq rose 3.6%, the Dow fell 1% and the S&P 500 climbed 0.3%.

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Why This Metric Matters The American Association of Individual Investors (AAII) sentiment survey measures the percentage of individual investors who consider themselves "bullish," "bearish" or "neutral" on the stock market. At least recently, this indicator has served as a reliable contrarian indicator. On March 23, 2000 -- just two weeks after the market peaked -- bullish sentiment in the survey reached 65.7%, one of its highest readings of the year. On Dec. 21, the survey came in with a bearish reading of 51.1%, the highest bearish reading of the year. That time period marked what, at least short term, has proved a market bottom. Why does the indicator seem to work? At market tops and bottoms, investors tend to be lagging -- not leading -- indicators. Their emotional pain or exuberance is usually in response to what has already happened in the market. The contrarian investor believes that if everyone is bullish or bearish, it could be time to behave otherwise. "At the extremes, individuals tend to be emotional. This is why it's smart to sell when everyone is buying and buy when everyone is selling," says Barry Ritholtz, market strategist at Weatherly Securities. "To paraphrase [legendary investor] Bernard Baruch, all I do is what everyone wants me to -- when they're all selling, I'm a buyer; when they're all clamoring to buy, then I want to be a seller. ..." The AAII surveys individuals on its Web site each week. AAII asks participants where they think the stock market will be in six months. Only subscribers to AAII are eligible to vote, and they can vote only once during the survey period.

How Often Updated on TSC Weekly, on Thursday morning

Historical Info

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