Throughout this bull market we have been highlighting the fact that the 'bullish camp' is more like temporary housing than anything where investors plan to stay for any extended period of time. As the market rallies, investors slowly trickle to the bullish side of the argument, but then whenever there is even the slightest hint of trouble they are quick to exit. This week's sentiment survey from AAII further illustrates that point. After reaching as high as 48.94% back in mid-July, bullish sentiment has declined in four out of the last five weeks. In the latest week, bullish sentiment declined from a slightly above average level of 39.5% down to 34.5%. This represents a six-week low in bullish sentiment, even as the S&P 500 is within 1.5% of a 52-week high.
The fact that investors remain cautious and are quick to flip from bullish to bearish is certainly understandable given the experiences of the last 13 years. Obviously, nobody wants to experience a repeat of the peaks of 2000 and 2007. Additionally, the fact that investors are NOT throwing caution to the wind and becoming complacent is also a healthy sign that sentiment is far from overly optimistic.