Thursday, February 28, 2013

The bulls lose their nerve

The latest AAII investor sentiment survey is quite revealing: it shows that the percentage of bullish dropping to its lowest level in seven months. 

While the percentage of bears rose only slight – to 36% compared to last week’s 33% -- the bulls fell to 28% from the previous week’s 42%.  That’s a sizable drop in bullish sentiment in only a week, especially given that stocks retreated only 2.5% from last week’s high. 

Specifically, the sudden drop in the AAII bulls illustrates a “run for cover” mentality among the buyers and shows just how sensitive investors have become to even the smallest of pullbacks in the market.  Such fragile psychology is a sign that the “wall of worry” is still intact and likely to provide an underlying support for equities while the latest cycle bottoms.  

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