Investor sentiment is bullish – Recent Drop in Bulls, Rise in Bears sets up market for more upside

The American Assoc. of Individual Investors (AAII) has been measuring investor sentiment every week for years.  As you can expect – many market historians have attempted to tease some meaning and predictive qualities from the data.  The chart below is an expression of what happens to the price of the S&P 500 10 weeks following a move in an adjusted ratio of bulls vs. bears and neutral investors.  The signals have reasonable utility.  Since 2007, the market has been up 83% of the time by an average of 5.2% 10 weeks following a date when the ratio rises from a low and breaks above  0.75.  The driver of a bullish signal is a drop in bulls relative to a rise in bears and neutrals. Simplistically, in classic contrarian fashion, the less bullish the sentiment, the more bullish the signal. I can deal with that, how about you?  Jeb B Terry, Sr. July 3, 2013

Investor Sentiment is bullish 7-2-13

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