Where have all the bulls gone?

After two weeks of sub-20% readings, the share of respondents to the AAII sentiment survey reporting as bullish has risen back up to 22.8%. That increase in optimism comes on what has been pretty choppy price action in the past week, as the S&P 500 had risen, then given up roughly 3% since the last update of the AAII numbers.

The increase in bullish sentiment broke a streak of back-to-back-to-back declines, and the opposite shift in sentiment could be seen for bearish sentiment. The percentage of respondents reporting as pessimists fell by 12.6 percentage points in the latest week, bringing the reading back below 50%. While the double-digit decline was large, the first week of June actually saw an even bigger drop of 16.4 percentage points.

The significant inverse moves in bullish and bearish sentiment have resulted in the bull-bear spread to move higher, but at -23.9, sentiment continues to heavily favor the bears.

In fact, taking a four-week moving average of the bull-bear spread shows that the reading has been below -10 (meaning on average bears have outnumbered bulls by at least 10 percentage points) for 23 straight weeks. That continues to close in on the record six-month streak that ended in February 1991, as bulls are few and far between.

Given the drop in bears this week was far larger than the increase in the number of respondents reporting as bullish, the bulk of the shift went to the neutral camp. That reading rose 8 percentage points to 30.5%. While that only leaves the reading at the highest level since the week of June 9th, it was the largest one-week increase since the last week of March and ranks in the top decile of all week-over-week moves on record.

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