I doubt that anyone who is invested escaped last week's carnage in the market. I was well up there in the misery index. The big money question is which way do we go from here? One very interesting index is the AAII sentiment index ratio. That is a weekly survey of a large group of individual investors. It lists the percentage who are bullish, neutral and bearish. Interesting that the % who are currently bullish is only 16.5%. This is the lowest percentage of bulls seen since 1992.
A contrarion indicator using these numbers is the bullish sentiment index ratio. That is the % of bulls divided by the % of bulls and bears. As a contrarion market indicator, it is very bullish when the ratio drops below 30%, and very bearish at a ratio above 70%. As of friday, that ratio stands at 28%, indicating that the investing public is filled with doom and gloom and a bottom is either here or near.
The last time the index was in this range was 2/20/03. The index dropped to 27%. The market started a huge bull run within a couple of weeks of that low.
I have never been much of a believer in trying to "time the markets". Rather I seek out stocks that I believe are currently undervalued, particularly in the small cap arena, which is what this board is all about. But one thing that does seem to repeat itself over and over again is that the best time to buy is when the market outlook is the gloomiest. The best time to sell is when euphoria is rampant. Based on that, this is likely a good time to be buying, not selling.
