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Tuesday, May 05, 2009


examining market sentiment

mark hulbert.

A similar story is being told by the sentiment survey conducted weekly by the American Association of Individual Investors, in which members who visit the organization's Web site are asked to indicate whether they are bullish, bearish or neutral on the stock market. To distill these readings into a single sentiment number, I follow the lead of some past researchers in calculating a ratio of those who say they are bullish to the total who report being either bullish or bearish.

This ratio jumped by 26.6 percentage points during the bear market rally in late 2001 and early 2002, and by 28.2 percentage points in the rally that began last November 20. Those jumps were about triple the average gain of just 9.8 percentage points during the first eight weeks of past bull markets.

And how much has this AAII ratio risen since March 9? By 24.1 percentage points, quite close to the jumps witnessed during past bear-market rallies, and far more than the increases seen at the beginnings of past bull markets.

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