:::: Update on Sentiment - AAII, NAAIM and Rydex Ratio By Erin Heim | July 14, 2017
The AAII bull/bear ratio is nearly 1.0 which means there is nearly the same amount of bulls as there are bears. This was the case last week as well. However, looking at the numbers more closely, we see that there has been a slight increase in the number of bears and the number of bulls is clearly decreasing. I don't think it should be overlooked that 42% of respondents were neutral. I'm seeing more and more investors moving neutral which in my mind indicates complete uncertainty.
I've been noting every week on the MarketWatchers LIVE show that money managers have been less exposed during this recent rally from April bottom in comparison to their exposure along the previous two highs. That would indicate a slight increase uncertainty by the 'big guys' on this latest top. More concerning is the steady decrease over the past two weeks in the exposure reading.
I love the Rydex Ratio charts. Rather than a "poll" to find out where investors and money managers stand, we can track the assets in the Rydex funds. This "poll" is about putting your money where your mouth is. We can see that investors are beginning to get a bit more bearish as the ratio is beginning to rise in value. In the thumbnail you can see that money is beginning to flow into bear funds and money markets and out of the bull and sector funds.
Conclusion: I mentioned at the beginning of this article that sentiment is contrarian. So one might ask if the sentiment is getting bearish, isn't that a good thing? It's a good thing when sentiment is very bearish as that typically proceeds a rally. Although I am seeing deterioration in bullish sentiment, I wouldn't say we are looking at wildly bearish poll numbers or asset movements. I think for now, the loss of blind exuberance may finally be diminishing and could very well be the beginning of a pullback.
Technical Analysis is a windsock, not a crystal ball.
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