Stock Market Sentiment Readings Mostly Bearish

The Investors Intelligence Bull/Bear Ratio remained below 1.00 this week for the eighth consecutive week, holding at 0.96 for a third week, after falling steadily from 1.15 in mid-September to 0.57 four weeks ago—which was the lowest since March 2009 (chart). Bullish sentiment dipped for the second week to 35.2% after increasing the prior two weeks from 25.0% (the fewest bulls since early 2016) to 36.9%. Bearish sentiment exceeded bullish sentiment for the eighth week, though it fell for the fourth week, by a total of 7.5ppts (to 36.6% from 44.1%). It was the largest group for the sixth consecutive week, unseating the correction count—which held the top spot for the prior four weeks.

Meanwhile, the AAII Sentiment Survey as of November 3 showed pessimism about the short-term direction of the stock market plummeted to its lowest level in more than seven months, while the latest survey also reported a large gain in neutral sentiment to its highest percentage since April 21, 2022 (37.3%) (chart). The percentage expecting stocks to fall over the next six months plunged for the second week, by 12.8ppts during the November 3 week and 23.3ppts over the period, to 32.9%, the lowest since March 31. Even with the drop, bearish sentiment remains above its historical average of 30.5% in 49 of the last 50 weeks. The percentage expecting stocks will rise over the next six months climbed for the third week to 30.6% after falling from 23.9% to 20.4% the previous week, though optimism held below its historical average of 38.0% for the 50th consecutive week. The percentage expecting stock prices will stay essentially unchanged over the next six months jumped 8.8ppts to 36.5%, the highest since this April 21’s 37.3%. The latest reading puts neutral sentiment above its historical average of 31.5% for just the third time in 28 weeks.