Less Than 20% Bearish For The First Time In 115 Weeks

Bullish sentiment measured through the AAII weekly survey was at the lowest level since the fall last week, but after jumping 7.7 percentage points, it is now at the highest level since the end of April. Not only is it high relative to the past few weeks, but the increase also brings bullish sentiment 6 percentage points back above its historical average. Additionally, the week over week increase was the largest since the week of April 8th when the reading had risen 11.1 percentage points.

In recent weeks, neutral sentiment had been surging; topping 37% last week for the highest reading since the first week of 2020. Although it reversed lower this week down to 36.2%, neutral sentiment remains around some of the strongest levels in over a year.

With the pickup in bullish sentiment, bearish sentiment plummeted to 19.8% on a 6.6 percentage point decile; the largest since February. Falling below 20%, bearish sentiment took out its March and April lows and is now at the lowest level since January 2018.

Not only is that one of the lowest readings in bearish sentiment in recent history, but that drop below 20% brought to an end a 115-week long streak of readings in bearish sentiment above that level. As shown below, that surpassed a three-week shorter streak ending in December 2017 to make for the second-longest such streak on record. The longest streak which ended in December 2010 went on for more than twice as long as this most recent run.

Historically, lower readings in bearish sentiment have tended towards weaker performance for the S&P 500 going forward as shown below. But when it comes to the past times that bearish sentiment has broken below 20% for the first time in at least 50 weeks, performance has actually tended to consistently be positive. In fact, across each of the past six instances, the S&P 500 has been higher six months out every time. Granted, for the most part, the typical move higher is usually smaller than other periods. 

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