Here is a quick wrap up of this past week’s sentiment data:
The American Association of Individual Investor’s (AAII) weekly sentiment survey had 38% bulls this week and 42% bears. That’s an increase in the ratio of optimists and a decrease in the proportion of pessimists. But all in all, we’re back to where we’ve been for the past few months - basically back and forth without hitting any noteworthy extremes.
According to the Investors Intelligence survey of stock newsletter editors, we had 36.7% bulls and 35.6% bears. That’s almost absolutely unchanged from last week. So once again, not much is changing in people’s perception of future stock market returns. And the results have the field split almost equally down the middle.
The Hulbert Stock Newsletter Sentiment Index which also measures stock newsletters who attempt to time the stock market is showing a surge in optimism. Among the group of market timers, the average recommended exposure to the market is +46.5% - this means that they are telling their clients to put 46.5% of their assets in the market (on the long side). The last time they were this optimistic was back at the start of the year - when, as coincidence would have it, the Dow Jones was also trading above 9000 as it is once again today. But I’m not convinced that this is a negative omen for the market since the level of bullishness is not extreme at all.
The CBOE put call ratio (equity only) actually increased along with the S&P 500 index. On Monday the put call ratio was 0.59 - suggesting that calls were almost twice as sought after as puts. By today the ratio had risen to 0.78 while the S&P 500 rose 28.13 points for the week. This parallel up move is a rare occurrence between the two indexes and it suggests that at least when it comes to the options market, there isn’t a euphoric acceptance of the rally’s longevity.
The ISEE sentiment index is also confirming the same nonchalant mood in the options market. Here is the updated chart showing the daily and 10 day moving average for the equity only ISE index:
If you look closely at the far right edge, you can see that the short term moving average has flat lined. Remember that the ISE is a call put ratio so the higher the number, the more optimism and the lower the ratio, the more fear it reflects.
Enjoyed this? Don't miss the next one, grab the feed or