The latest AAII Sentiment Survey again indicates extraordinary reactivity to price.
Last week, the major equity indices pulled back a bit with the S&P 500 losing 1.3% (intraday high to low), the $DJIA a little over .5%, the Nasdaq 2% & the Russell 2000 a little more than 3%.
In response to this shallow correction, however, the sentiment survey shows a huge spike in bearish sentiment of +26.3% from 28.2% to 54.5% while bullish sentiment decreased 16.2% to 19.3%.
While I have been writing and speaking extensively about the high sentiment reactivity for a while now and how it bouys equity prices, I am still surprised by the extremity of it evident in these numbers.
In an environment where sentiment shifts so much on such modest declines, the shift acts like a put or hedge against lower prices. Individual investors are an emotional wreck and it is astonishingly bullish.
Note: For all the latest on the AAII numbers and analysis I highly recommend following Charles Rotblut on StockTwits. He is a VP at AAII, does a great job covering the numbers and much more and he will answer your questions insightfully on the stream.
$SPY $IWM $DIA $QQQ