In this chart I plotted the period following a sub 25% AAII bulls reading, followed by a sharp rise to 55% bulls at the peak in April 2021. We now reset back down to sub 25% this week, so we might be watching a 'coiled spring' situation in equities. This is not so easily seen in SPY as the AAPL performance as of late distorts how equities acted for the majority of people. I included the performance of my trading strategy in the period of rising sentiment, and during the last period with deteriorating sentiment. I expect to make outsized gains again as we get a period of steady trends once more. Note I actually caught the bottom in Nasdaq overall, but the gains from that outperformance round were retraced recently with a series of short term losses.
Best of luck, try to milk the good times ahead. Outsized gains away, potentially.
Cheers,
Ivan Labrie.
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This fits nicely with quarterly and yearly T@M trends...
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Weekly view, cleaned up the chart without the daily support levels.
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Pretty sure the market bottomed.
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Now it's a bottom. There's a very juicy trend setting up in financials once again, and value, as we get some reopening momentum thanks to the Merck pill news, paired with the evolution of Delta...The yield curve is sending a loud and clear message to buy these names. The sentiment reset makes for a great cue that we need to go hard and heavy into the next big market trend, which I think will be financials, energy, value, curve steepeners once again: the reopening trade.
Trade active
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So far, so good...We've seen some incredible money making opportunities set up and materialize since I posted this. As expected.
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Sentiment reset predicts periods of easy market conditions...so far, has been the case. Last one we had big increases in our account value in stocks. Now we broke into new highs again for the equities account. AAII bulls has gone back to recent highs, but not to extreme highs, AAII bears, less than half way down from the recent top...There's room to go in both imo. Before we reach a sentiment extreme on the other end of the spectrum.
So far it tracked this, but I'm concerned locally, given the recent turn of events, although rotations are better than an outright selloff in absolutely everything with rallying VIX...
I think we all want you to be right, I've never heard of AAII.
I'd love to see more historical data on it.
IvanLabrie
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@SWAGKINGHEEB, Some recent examples...the key is that you can expect more or less steady trends to the upside after sentiment gets reset. The details about how far and for how long the trends will go will come from technical charts. But it does make you cautious when bull % is over 40%.
OverexposedPhotoOfADress
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Interesting stuff. First time hearing about the AAII investor sentiment survey, so I'm excited to dig in there. Any general rules you follow with it?
I ask because, from your results, it appears to be "if AAII is high, SPY is going up. If it's low, SPY is going up. Stocks only go up." :P
IvanLabrie
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@OverexposedPhotoOfADress, the rules are, extreme readings seem to be between 15-30% for bullish setups and 40-60% for bearish ones. You will have to fine tune entries from technical charts as well, it is simply an alert to be aware of and can be a predictor of the steadiness of bullish trends that may occur after sentiment gets reset back down. It has worked even during bear markets, for example between 2000 and 2003, the 2002 low was a bull % reading below 25%, it didn't happen before that bottom after the 2000 top.
fantasyste
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so which can be the top of this trend?
IvanLabrie
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@fantasyste, the trend signal implies a time and price duration for the rally, I plotted the quarterly and yearly chart signals. We can track trends in smaller timeframes to get more detailed analysis, when there is confluence of multiple signals, you get higher odds of a reaction on the spot. The shape of the correction depends on whether it is the end of a larger cycle or a continuation move building...
fantasyste
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@IvanLabrie, ok but you dont have a top price to check?
fantasyste
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@IvanLabrie, man... something strange is that covid will come back imho.... covid pill is needed just to calm the markets....
sklation1987
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do you know how to access AAII data on Tradingview? There used to be data from QUANDL but it seems that this data on AAII hasn’t been updated for months now.
IvanLabrie
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@sklation1987, I wish we had that data here, but it isn't AFAIK, I had to analyze it using Stock Charts and I hate Stock Charts.
I'd love to see more historical data on it.