Barrons – Investor Sentiment Readings

When I sent out the email on March 9 entitled Negative Sentiment Signaling Market Bottom I was EXTREMELY fortunate in that the market lows (so far) actually occurred on March 9. I received several emails congratulating me on calling the bottom. Let me be really clear- I didn’t call a bottom, only observed that with negative sentiment at the highest levels in history, it may be safe to “get back into the water.” At that time over 70% over the respondents to the AAII survey said they were Bearish, 18% proclaimed themselves Bullish, and the balance-12%- were too dazed and confused to determine what they were, so they called themselves Neutral.

Click on the link above to see the recent Sentiment Readings. I have a tendency to focus more on the AAII Survey because I like their methodology. I find it fascinating that some 2 months and 2000 points on the Dow ago, 82% of the respondents were Bearish or Neutral. Today, more respondents are Bullish than Bearish (44% vs. 33%), with 56% now in the Bearish/Neutral camp. Previously, the Bearish/Neutral camp was almost 5 times larger than the Bullish- 82% vs. 18%. It’s now down to 1.27 times. With a market that’s up 31% and almost 2000 points!

So, what does that tell me? The only thing it tells me is that investors feel really lousy at market bottoms- at precisely the wrong time- and start feeling better as the market goes up- at precisely the wrong time again. My wife and I actually went out to dinner last week for the first time in MONTHS because I had just opened my statements and did not get nauseous.
Emotion is the enemy of the successful investor.

Forrest Simmons | Senior Director