Investors Sentiment

Description:

A contrarian investor or the behavioral finance followers believe that when everybody is fully invested there will be no further purchasing power. At this point, the market is at a peak. On the other hand, when people predict a downturn, they have already sold out, at which point the market can only go up. A popular measure of market sentiment are surveys, which quantify the level of optimism or pessimism among investors like the Association of Individual Investors, Market Vane and the Global Futures Sentiment Index.

Indicator Details

	Updated:	•	weeky
	Signals:	•	Bullish: Extrem negative levels
		•	Bearish: Extreme positive levels

Our Investors Sentiment section contains the following indicators:

• Association of Individual Investors
• Percentage of Bulls Market Vane
• Global Futures Sentiment Index

Association of Individual Investors

Every week the AAII now polls its 170,000 members daily. Respondents indicate how they feel about the market's performance in the next six months. The Bull & Bear AII shows the number of bulls divided by the number of bears. High readings appear near market tops and low readings near bottoms.

Percentage of Bulls Market Vane

The principles of Contrarian Investing hold that when the vast majority of people agree on anything, they are generally wrong. Otherwise no market would function because there is simply no minority with money enough to make a majority rich. A true contrarian, therefore, will first try to determine what the majority are doing and then will act in the opposite direction. A unique feature of Market Vane's Bullish Consensus numbers is a weighting formula applied to the various market letters. More weight is given to letters with a larger following and less weight to those with fewer readers.

Each week a poll of market letters is taken to determine the degree of bullishness or bearishness among futures professionals. The theory is that when a significant number of participants are bullish, they are already positioned on the long side and there is little potential buying power left. If most participants are bearish, selling pressure has reached an extreme and prices will reverse to the upside.

Global Futures Sentiment Index

The Global Futures Sentiment Index is based on data from Market Vane and from the Association of Individual Investors (AII). High readings appear near market tops and low readings near bottoms.