Bullish sentiment remained above its historical average for the eighth time in the past nine weeks. Nearly 48% of individual investors said they expect the markets to trend higher over the next six months, according to the latest AAII Sentiment Survey.

The improvement reflected a decrease in the proportion of investors expecting the markets to remain flat. Neutral sentiment fell 7.4 percentage points to 25.6%, which is below the historical average of 31%. Neutral sentiment remains in the range held since the start of December, however.

Bearish sentiment rose slightly to 26.9%. This is the third consecutive week that the proportion of individual investors expecting the market to decline over the next six months has been below the historical average of 30%.

Despite the current trend, bullish sentiment remains below a level that would suggest it is at contrarian levels. Rather, the survey’s results imply that individual investors are comfortable with the current market conditions.

The results are not surprising given current market conditions. The CBOE Volatility Index is staying below 20, a sign of complacency on the part of traders. The S&P 500 has not had a daily change of 2% or greater since late November. (It also has not had an intraday move of 2% or more since early December.) At the same, stocks are off to a good start in 2010, with the S&P 500 up 2.81%.

This week’s AAII Sentiment Survey results:
Bullish: 47.4%, +6.4 percentage points
Neutral: 25.6%, -7.4 percentage points
Bearish: 26.9%, +0.9 percentage points

Long-Term Averages:
Bullish: 39%
Neutral: 31%
Bearish: 30%

The survey and its results are available online

Contact:
Charles Rotblut, CFA
Vice President and AAII Journal Editor
American Association of Individual Investors
crotblut@aaii.com
http://www.aaii.com

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