AAII Bears vs Bulls

Let's take a quick look at the latest AAII Bears/Bulls survey numbers this morning.

For the purpose of today's look, let's concentrate on the last 4 years.  You can see that in all of the recent times that ratio of bears to bulls has moved up into the "red zone," the market has continued to move up for a few more months.  When this ratio peaks out, however, the market corrects and does not stop until this ratio drops (on the inverted scale) under that 150 line.  You can also see that for every market top since 2010, the ratio of bears to bulls has actually increased (decreased on this inverted scale).  In other words, despair has evolved to even higher levels.  So here we are today, we moved up into that "red zone" earlier this year, the rally continued for two additional months, but now the trend is down.

Based on this brief look, the next good signal would occur in the weeks ahead as we see this indicator move under that 150 line (ratio of bears to bulls move up to above 150% on a 3-week basis).

You can learn more about this indicator by clicking here to watch a quick video.

Don Hays

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