Massive stock market rally affects investor sentiment

Posted May 7th 2007 3:08PM by Eric Buscemi
Filed under: Economic Data

With the Dow and S&P approaching new highs, conventional wisdom suggests investors would be becoming increasingly bullish. But, as measured by the AAII Index, bullish sentiment has declined to 28.6% from 46.9% three weeks ago. Bearish sentiment has increased to 54.6% from 29.6% during the same time period.

AAII has proven a very solid contrarian indicator over time. With bullish sentiment so low, this most likely means this rally has some serious legs. As the rally continues, those who are under-invested will have to rush and chase performance.

Remember, mutual fund inflow has stink, stank and stunk since the bursting of the bubble in the 1990s. There is still a lot of fire power in terms of individuals holding a ton of cash on the sidelines. I'd stay invested in stocks here and now.

Tags: dow, investor, sentiment