Update on Bullish Sentiment Indicators (AAII, Investors Intelligence)

Elliott Wave International has an article out titled Bullish Sentiment: Turning into a Stampede?, which addresses current market psychology and sentiment extremes. Hat tip to Business Insider and Mish.

"Keep that in mind as you read this recent market sentiment news from CNBC (4/6) about the latest Investors Intelligence survey:

"The number of investors with a bearish outlook plunged by more than a third in one week according to a widely followed investor survey released Wednesday, the largest amount of bears to throw in the towel in this poll since 2003."

The bears in that survey dropped from 23.1 percent to 15.7 percent in just one week. Apparently, the market's two-year rally has survey respondents feeling more optimistic -- not more cautious.

Many other groups also feel exceptionally bullish. The latest Elliott Wave Theorist reports that a "bullish consensus" has also crystallized among a wide range of investors and financial professionals:

Individual investors (AAII poll)—most bullish in six years
Newsletter advisors (I.I. poll 20-week average)—most bullish in seven years
Futures traders (trade-futures.com poll)—most bullish in four years
Mutual fund managers (% cash)—most bullish ever
Hedge fund managers (BoAML survey)—most bullish ever
Economists (news-org polls)—unanimously bullish
Top global strategists (three national year-ahead panels)—unanimously bullish
Even most 'bears' on the economy are bullish on stocks because of inflation!" 
(continue reading at ElliottWave.com)

Karl Denninger, author of the Market-Ticker blog, responded to this and said there were higher bullish AAII readings in December (2010) and January, which coincided with a higher market. He's right (look at the table), but I wonder what he thinks of the "Investors Intelligence Bull/Bear Ratio" chart that dates back to April 2007. Bullishness is at or above the 2007 highs, and the market peaked in October 2007. Robert Prechter, founder of Elliott Wave International, mentioned these sentiment comparisons on The Ticker (Yahoo Finance) in late February.

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