The S&P 500 has continued to press higher in the past week including attempts to push up to new highs in the past couple of sessions. As a result, sentiment has taken a bullish turn and has done so in dramatic fashion. As shown below, the American Association of Individual Investors (AAII) survey has seen big swings in bullish sentiment over the past few weeks. Starting in early December, bullish sentiment fell six weeks in a row culminating with only a quarter of respondents reporting as bullish last week.  In this week's survey, 43.4% of respondents reported as bullish.  In a single week, that entirely erases the past month and a half's drop as bullishness has rebounded ot the highest level since December 5th.

Former bulls had to go somewhere, and the recent decline in bullish sentiment resulted in bearish sentiment rising from a low of 30% at the start of December to a high of 40.6% last week. As for this week, bears fell back down below 30% for the first time since the week of November 14.

Given those readings in bulls and bears, last week the bull-bear spread was negative (meaning there were more bears than bulls) to the widest extent since November 2023. The rapid turnaround in sentiment resulted in this spread rising back up to 14.0 per the latest data. As with bullish sentiment, that is the highest reading since early December.
 

One thing to factor into this massive turnaround in sentiment is the S&P 500's return to record highs.  As might be expected, historically sentiment leans much more bullish when the index is closer to a new high. In the chart below, we show the average reading in the bull-bear spread throughout the history of the survey dependent on how far the S&P 500 is trading below a 52-week high.  As shown, the bull-bear spread has averaged dramatically more bullish readings when trading at 52-week highs and has likewise leaned positive only when the index was at least within a few percentage points of a new high; as is the case presently. That means the big swing towards bullishness is notable but maybe not exactly surprising with the S&P 500 returning to its highs.

While the context of where the S&P 500 is trading versus previous highs is important, that shouldn't steal the thunder from just how big of a move sentiment had this week. The chart below shows the week-over-week change in the bull-bear spread over the past two decades.  As shown, this latest 29.2 percentage point jump is the largest since November 2023, and prior to that, every other such large move higher came before 2010!

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