Sentiment

One of the things I monitor very closely is sentiment about the stock market. There are a number of ways to do this, but I've found over the years, that the best contrary indicator is the AAII poll of individual investors. These individuals are an emotional bunch and when they are bearish, the market is almost always at a bottom. Bearish sentiment has been rising all month and is now at levels that in the past have proven to be great buying opportunities. Here's the numbers for this week:

AAII Index
Bullish 28.6%
Bearish 56.1
Neutral 15.3
Source: American Association of Individual Investors,
625 N. Michigan Ave., Chicago, Ill. 60611 (312) 280-0170.

It is also instructive that even with the big rally this last week, the number of bears continues to rise. Apparently, the individual investors that make up the membership of AAII don't believe this rally is the real thing - which means it probably is.