2 AUG 2009, Sunday

1. More on investor sentiment...
2. The prior post detailed the Investors Intelligence sentiment numbers (bullish / bearish percentages). They are the investment newsletter writers. Typically, these are folks who've been around awhile and have seen a number of different investment environments.
3. The links tonight will show a slightly different story. It details the percent bulls and bears reported by the American Association of Individual Investors. Basically, it is a survey of retail investors...or the little guys. These, unfortunately, are the folks that tend to get too bullish and trapped or too bearish and trapped. They are the folks that "Da Boyz" are watching because they become the bag holders....remember the childhood game of "Hot Potato"?
4. This recent move up has got more folks optimistic. It shows more bulls and fewer bears than it has in over a year. They're not at extremes and, over time, the levels can shift as denoted by the red and green bands. But, I do like to watch the response to price action. For example, in the 9 JUL blog entry I noticed ~55% bears among this group and said that there was a possibility of a bounce in prices. It played out...more than I thought and was a reason why I wasn't committed to my short position.
5. Another point...in MAR 2009, the retail guys were at bearish extremes not seen since the 1987 Crash. I was alert to a possible turn. But....there's always a but, isn't there...when you look at the % Bears chart you'll understand. I was looking for a bounce and restest in that indicator for investor safety...unfortunately, it didn't happen. What I mean is a wiggle (comes out of the bands and goes back into the bands) at the lower levels like you see in early 2005, late 2005, mid 2006, early 2008. Instead, we got a straight up shot which is unusual for this group. You can see similar action in the % Bulls. Take a look....
6. AAII Bearish %
7. AAII Bullish %
8. NOTE: Sentiment is not a timing tool so much as it is an alert as to the environment. The emotions can hold for quite some time, too, before they get exhausted.
9. Welcome to August! A new month...let's see what happens! Currently, short and intermediate over bought while the long term is neutral.