Sentiment

By: Ed Carlson | Tue, Dec 8, 2015
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Technicians typically look for signs of excess bullishness or bearishness in sentiment polls to conclude markets have swung too far in one direction or the other. An extreme in bullishness is often followed by a decline in equities and an extreme in bearishness is often followed by a rally.

This year the American Association of Individual Investors poll showed an extreme in neutral sentiment (blue line) at the May high in the S&P 500 (orange line). Last week, neutral sentiment returned to the same level that marked the high in equities last May. It's unusual to see such a high level of neutral sentiment. It's as if there is loads of "sentiment" sitting on the sidelines waiting to become bearish or bullish. Last May, investors turned bearish. What happens this time should soon become known.

American Association of Individual Investors poll

 


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Ed Carlson

Author: Ed Carlson

Ed Carlson
Seattle Technical Advisors.com

Ed Carlson

Ed Carlson, author of George Lindsay and the Art of Technical Analysis, and his new book, George Lindsay's An Aid to Timing is an independent trader, consultant, and Chartered Market Technician (CMT) based in Seattle. Carlson manages the website Seattle Technical Advisors.com, where he publishes daily and weekly commentary. He spent twenty years as a stockbroker and holds an M.B.A. from Wichita State University.

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