AAII released its Weekly Sentiment Survey and boy was it bearish.
On November 14th, AAII was at 48% this two STD from the norm, which we noted. Since then SPY has rallied 17%, which is right on par with the other times. Before that the AAII hit about a 2std move on May 14th, SPY did drop 5% after this but from then to now, it has been a 17% move. This is typical, as from AAII
We made 40 observations where bearish sentiment was two standard deviations above the mean (greater than 46.3%). This is an indication of high pessimism among investors and, potentially, a sign of a market rally in the coming months. When this occurred, the S&P 500, on average, gained 18.0% in the succeeding year.
But if we look at the latest numbers, we are seeing that the sentiment is even more bearish then previous. That is right over half of the market is bearish right now! In fact this is almost a 3 STD move a 3 STD move would be about 56%
AAII looks and the historical significance of this:
Raising the bar even further, we found eight times when bearish sentiment was three standard deviations above this mean (greater than 55.5%). The results were even more remarkable, with an average one-year gain in the S&P 500 of 23.7%.
That is a pretty good return and while the 54.5% is not an exact 3 STD move it is close and there is the potential that on 4/10/2014 this market can be 17%-20% higher from here which would put SPY above 180.