Here is the sentiment overview for the last week of the month (in terms of returns, the worst January ever!):
The American Association of Individual Investors’ weekly sentiment survey had 47% of respondents bearish and only 25% bullish. That may seem like good odds for a rally… except that we’ve been hereabouts before (in late 2008) and yet the market weakness continued.
This week’s II sentiment survey shows the bears at 38% and the bulls at 34.8%. This is a continued amelioration of the exuberance that we’ve seen for the past several weeks, but it still leaves the two camps, more or less, equal to one another.
Yesterday we talked about the lack of IPOs which are in a sense, supply of “paper” to the market. On the other side stands the fund flows which measure the demand for equities through the purchase or sale of mutual funds.
Not surprisingly, mutual funds have undergone a scorched earth scenario where for more than a year, we’ve hardly seen net inflows:
Although this data has a contrarian tinge to it, there is nothing bullish about seeing a continuous erosion of mutual fund flows. A sudden and sharp decline is far different than what we are seeing now. Eventually, for the market to be able to find its legs again and push forward, we will need to see people willing to pour billions and billions of dollars into new mutual fund purchases.
Neither the CBOE put call ratio or the ISEE call put sentiment ratio are significantly different from last week’s sentiment overview.
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