With the Dow suddenly hitting record highs on what seems like a daily basis, you would expect to see individual investor sentiment improve, and that’s exactly what we saw this week. According to the weekly sentiment survey from AAII, bullish sentiment surged 9.4 percentage points to 45.66% from last week’s reading of 36.22%. That move represents the largest one week increase since early July and the highest weekly reading since mid-February.  While we’re not quite at the 50% reading yet, we would note that the last time optimism in this survey neared the 50% level was in late December. That wasn’t the exact top of the market right before the correction, but it was close to it.

While bullish sentiment starts to rise, bearish sentiment is back down in the mid-20 percent range, which is a level it has seen repeatedly throughout the year.

So if all the new bulls didn’t come out of the bearish camp, where did they come from? As shown in the chart below, the pool of undecideds continues to shrink as it fell from just under 33% last week to 29.22% this week. That’s the lowest level since mid-July.