Last week we said, “the probabilities favor “fading pessimism” and getting selectively long”:
AAII Sentiment Survey Results – Pessimism Reigns. What to do about it?
This week, the survey results are even more favorable for bulls as pessimism grew (taking bullishness down to 22.53% and bearishness up to 42.58%). These are extreme readings and as you can see in the featured chart above, odds favor buying at these levels over selling – which is what we have been doing.
As with all indicators, they are not foolproof. They should be used in combination with other fundamental and technical factors. Always remember, extreme reads can stay extreme but the probabilities don’t favor it.
