Testing The Wall Of Worry
热2已有 5661 次阅读 2010-03-25 20:14Posted: 25 Mar 2010 05:28 AM PDT
This is from our Morning Report this morning:
One chink in the armor of those who suggest folks are all-out too bullish right now comes from the sentiment survey from the American Association Of Individual Investors.
The percentage of respondents in that poll who expect the market to rise dropped last week, despite a market that's been hitting on all cylinders. And it dropped again this week, despite the S&P moving to a new high.
Not surprisingly, this is not typical. Usually, we see these investors get more and more optimistic as the market rises (especially when it hits a new high) and more and more pessimistic as it declines.
One chink in the armor of those who suggest folks are all-out too bullish right now comes from the sentiment survey from the American Association Of Individual Investors.
The percentage of respondents in that poll who expect the market to rise dropped last week, despite a market that's been hitting on all cylinders. And it dropped again this week, despite the S&P moving to a new high.
Not surprisingly, this is not typical. Usually, we see these investors get more and more optimistic as the market rises (especially when it hits a new high) and more and more pessimistic as it declines.
I completely detest the phrase "bull markets climb a wall of worry" because it's an over-used, not-entirely-accurate platitude. Surely, it will be thrown out a sickening number of times today from anyone who studies this data.
Instead of clichés, let's just look at history and see if this has ever happened before. What we'll look for is any time that the AAII Bullish Percentage declined at least 10% (for example, from 60% Bulls to 50% Bulls) over the past two weeks while the S&P 500 rose at least +1% to a new 52-week high during that same span, from the survey's inception in 1987 through the present.
For the most part, the market did OK going forward...but it surely wasn't the raging buy signal that the "wall of worry" camp would suck us into believing. A month later the S&P was positive less often than random, and with an average return that was less than a quarter that of random.
In fact, across all time frames the performance was good, but not statistically different from any other time.
If you're looking for a bullish angle, then you might zero in on the fact that not only did the Bullish Percentage drop by a large amount, but it's at a relatively low absolutely level of 32%.
There were only four weeks from the above table where the Bulls were this low or lower: 07/19/89, 03/03/93, 11/06/96 and 05/02/07. The performance in the S&P after those instances was better, at least in terms of consistency. Each was positive 1 week, 3 months and 6 months later, with averages of +1.1%, 3.8% and 4.4%, respectively. That's good, but again nothing awe-inspiring.
There were only four weeks from the above table where the Bulls were this low or lower: 07/19/89, 03/03/93, 11/06/96 and 05/02/07. The performance in the S&P after those instances was better, at least in terms of consistency. Each was positive 1 week, 3 months and 6 months later, with averages of +1.1%, 3.8% and 4.4%, respectively. That's good, but again nothing awe-inspiring.
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