In the last 2 weeks we talked about fading pessimism and buying stocks. Even after the big bounce we got in the market following the extreme pessimism, there is still skepticism in the market. This bodes well for continued gains in coming weeks as the market can climb the wall of worry.
AAII Sentiment Survey Results – Pessimism Reigns. What to do about it?
As you can see in the featured chart above, AAII bullish percent is still meaningfully below 30, although bearishness HAS dropped below 40 – which implies some of the fear/pessimism is starting to thaw. The reversal of sentiment/market opportunity is still in its early stage and not anywhere near euphoria that we would need to see in order to consider lightening up.
As with all indicators, they are not foolproof. They should be used in combination with other fundamental and technical factors – as a barometer (not a crystal ball). Always remember, extreme reads can stay extreme but the probabilities don’t favor it here.
