Bears Outnumber Bulls by Biggest Margin Since August

“It’s a good thing from a contrarian perspective in that a market low typically is established when there is fear in the market.”- Katie Stockton

Bloomberg - The 7.2 percent drop in the Standard & Poor’s 500 Index since its April high through yesterday has turned more investors pessimistic. A survey from the American Association of Individual Investors showed bears outnumbering bulls by the biggest margin since August. The ratio of bullish-to-bearish publications in Investors Intelligence’s survey was the lowest since September.

More pessimism suggests shares are likely to rise because bearish investors may have sold their holdings and would have to buy to get back in. The AAII’s weekly survey showed 43 percent of the respondents were pessimistic, the ninth consecutive week that bearish sentiment stayed above its historic average of 30 percent. Bulls accounted for 29 percent, down from a peak of 63 percent on Dec. 23. The ratio of bears to bulls was 1.47, the second-highest reading since Aug. 26 after last week’s 1.95.

The last time bears outnumbered bulls by a wider margin, the S&P 500 rallied in five of the seven following months.

Sources:

Bullish Sentiment Actually Rises (Bespoke)

Bullish Sentiment Rebounds (PragCap)

Capitulation of Bulls Promising Sign for S&P500 Index: Technical Analysis (Bloomberg)