This week's Barron's reports that only 19.3% of the AAII sentiment respondents were bullish. At face value this would appear to be wildly bullish from a contrarian point of view, however, for last couple of years there has been a strange absence of bulls in this survey even when the indexes were marching strongly higher and within a whisker of highs. Over this period the highest bull reading was a very tame 58%.
I believe some of the explanation can be found looking at the chickens. This week the bear number was 34.1%. You'll note 34.1 + 19.3 = 53.4%, so a whopping 46.6% of folks there were not bulls, not bears, but were chickens.
This chicken number where most folks appear to be hiding appears to currently be providing a much better contrary indicator for the index behaviour (the higher the neutral reading, the more likely a top is occurring with a bit of data smoothing). I don't understand why there are so many feathered friends at AAII instead of bolder bulls or bears, but betting against the majority is alive and well if you can just find where they are hiding and lately at AAII it's in a coop.
Regards,
Douglas
