If You Read Thursday's Comments Wednesday Night...

[tsptalk]

I made a late update after the AAII survey came out that you may want to read...

"Here is one stat that actually makes me wonder if this is the breakout. The latest AAII Investor Sentiment Survey came out last night (Wednesday 1/4) and the results are quite surprising to me. Those polled who said they are: Bullish: 29% Bearish: 40%

This was taken Wednesday. The herd is bearish? More people believe the market is going to go down after what we've seen the past two days? How can that be? This is the "dumb money." That usually means higher prices for stocks. Combine that with the "smart money" OEX options traders being very bullish, which we talked about yesterday (see yesterday's comments below) and you have to wonder: Either that 40% bearish figure is a misprint or we may have to reconsider our short term bearish posture."

 

[Mike]

I really don't know how the herd could go bearish after two good days in the market. Either they were polled before the upswing, or the numbers are backwards.

Tom, have you ever seen that survey produce numbers like those after the market went up?

 

[TiCKed]

Maybe I'm the only one....but I'm confused.

Is this a "Yes means No" thing?

Is the "Dumb Money" really SO dumb, that we can assume they are wrong 100% of the time?

 

[tsptalk]

Is this a "Yes means No" thing?

Is the "Dumb Money" really SO dumb, that we can assume they are wrong 100% of the time?

Sorry TiCKed, yes this is a contrarian indicator. The dumb money isn't always wrong, but when the numbers move to extremes, like 40% bears, it's an eye catcher. It hasn't been 40% since the late October low.

 

[tsptalk]

Tom, have you ever seen that survey produce numbers like those after the market went up?

Not too often. This is a very confusing short term period. Tomorrow I'm going to talk about this in the comments as I try to make sense of it today. The sentiment has come down just as indices are moving higher but internally the new highs/new lows has been moving down and selling volume has picked up (ARMs index). Very strange action. Ala 1999 when you looked foolish if you were out of stocks because they were skyrocketing (tech anyway) but you knew the rug was about to be pulled out from under them. But when? How much of a rally do we want to miss? Tough time for timers.