2 Sentiment Surveys Hinting at High Hopes for Stocks

Both the NAAIM and AAII surveys have 10-week moving averages at multi-year highs

Jan 13, 2017 at 12:05 PM
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    While stocks have been hesitating lately after the post-election "Trump rally," sentiment levels remain quite high. While not every sentiment survey signals frothy levels of optimism, it's clear that investors in general have been taking a glass-half-full approach in recent weeks.

    Most recently, the National Association of Active Investment Managers (NAAIM) exposure index edged slightly lower. The current reading of 89.29 is down from the multi-year high of 101.60, set as recently as early December. For comparison's sake, the average NAAIM reading since inception is 59.9 -- almost 30 points lower than this week's number. In other words, active money managers are much more invested than usual. Plus, the 10-week moving average of the NAAIM index just reached its loftiest level since early 2014, per the chart below, courtesy of Schaeffer's Quantitative Analyst Chris Prybal:

    naaim jan 13

    Elsewhere, the American Association of Individual Investors (AAII) just reached its 106th straight week in which the bullish response rate was less than 50% -- the second longest streak in history, according to Prybal. But that doesn't tell the whole story.

    For the week ending Jan. 11, the bulls accounted for 43.6% of those surveys, down 2.6 percentage points from the prior week. However, this is well above the historical average of 38.4% bullish, while the bearish reading was below normal (27% vs. 30.3%). Additionally, Prybal observes that the 10-week moving average of bullish sentiment is at its highest level since Jan. 29, 2015, at roughly 45%:

    aaii jan 13

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