AAII Investors are showing their defensive posture; looking for stocks to pullback.
Looking across the blogosphere as well as articles from media outlets it is hard to miss what the majority are looking for in terms of direction from this market. Every Tom, Dick, and Harry are looking for stocks to pull back from current levels to offer up an opportunity to get long.
Stocks have been in a steady uptrend since March’s follow-through day but have been slowly creeping higher since the end of March. If you notice pullbacks have become tighter, but when stocks move higher their percentage move hasn’t fallen. Volume might be below average but accumulation is occurring in the market. Many may be positioning themselves to chase equities than catch them on a dip.
The most notable sentiment indicator AAII Bull vs Bear Index shows Bears ruling with more than 40% of respondents are bearish. Looking deeper into the survey 45% of AAII investors are in CASH! By far the highest level of cash in the history of the survey. Again, those in the stock market have positioned themselves “trying” to catch a dip in equity pricing.
Let’s not pass on only 41% of AAII investors are in equities, by far the lowest in history of the survey. In addition to the AAII survey the II survey of Stock Market Newsletters continues to show more Bears than Bulls. The crowd is certainly bearish in the near term but the market continues to fight off pulling back.
The NASDAQ has been under a tremendous amount of accumulation since the March follow-through day. The Dow Jones Industrial Average has been a lagging index as well as the S&P500. Many might see this as a blemish on the market but I see it as a “GOOD” thing for the market. We need to see the appetite for growth stocks to grow and those growth stocks are in the NASDAQ not the Dow. The IBD 100 index lead all indexes last week with a 2.8% gain; the market is telling us growth stocks are the place to be.
Remember, do not get caught with opinions on the market and go with what it is telling you. Do not get caught chasing equity prices; it is a terrible position to be in and the number one rule of cutting losses will get you in position to grab gains.
Market Speculator
