Friday, February 22, 2008

AAII Sentiment Outlook

It is always hard to time trades based on sentiment, but since I'm bullish (at least for the next few months), I thought I might back up my position with a look at the AAII sentiment survey. The red plot is the 10 week adjacent average for the AAII bull-bear spread, plotted along with the weekly close of the S&P 500. I think it is pretty amazing that the difference between the bulls and bears (with the bears outnumbering the bulls) is greater than the lows of 2002 and 2003. They say that sentiment indicators do not work unless they are reading extreme levels. If this isn't extreme, I don't know what is.

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