Surprise: Investor Sentiment Isn't Even That Bearish Yet

Given the recent volatility you might think that we’d be seeing very negative signals in the sentiment data, however, the data continues to be mixed. The most recent Investor’s Intelligence survey showed bearish sentiment hold steady at 41%. This is a relatively mild level bearishness given the current environment. Previous major market bottoms have occurred at substantially lower readings.

Small investors, on the other hand, are exhibiting a bit more fear. According to the AAII small investor sentiment plummeted in the most recent week:

“Bullish sentiment, expectations that stocks will rise over the next six months, plunged 9.8 percentage points to 24.7%. This is the lowest bullish sentiment has been since November 5, 2009. The historical average is 39%.

Neutral sentiment, expectations that stock prices will remain unchanged over the next six months, edged up 0.2 percentage points to 33.3%. The historical average is 31%.

Bearish sentiment, expectations that stock prices will fall, jumped 9.6 percentage points to 42%. This is the eighth consecutive week that bearish sentiment has remained above its historical average of 30%.”

“The ongoing volatility in the market continues to affect individual investor sentiment. While there had been some hope two weeks ago that a short-term bottom was being established, the continued downward movement of stock prices has further frayed nerves.”

It probably takes years to build a good head of steam and settle into serious stagnation. Took Nixon price controls and 4 years of Carter lunacy to arrive at 1980 after all. An economy wasn’t destroyed in a day ya know.

Don’t forget that there are two modes to the stock market.

The first mode that everyone associates the the market today is speculative, that when you buy shares, the shares will increase in value, and then you sell them. Many investors, and many companies are oriented to just that.

But the other mode is the dividend mode. People buy shares that will earn them yields over time. People who ignore the ups and downs of the market for the most part. And the market hasn’t been in this mode for a long, long time.

This is the mode the market seems to be in now, however.

These people have no real motivation to buy or sell right now. And they may or may not have any motivation all the way up to November and December of this year.

Then lots of people will sell, to avoid paying the big tax increases at the start of the new year. The only thing that may stop this is if the Republicans sweep congress, and promise to restore all the Bush tax cuts retroactively, when they take office in January.

That's my take as well...the PPT can move the market up 100-200 points in a down day....but they can't make a BULL market with the fundamentals at hand....

like most retail investors, Ive been out for some time..
I still watch the commercials play against each other and on the right occasions ill play a small amount along with them for a very short time

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