Stephen Suttmeier, a technical research analyst at Bank of America Merrill Lynch, yesterday sent out a note regarding sentiment readings (See the chart above). The ratio of bulls to bears, as measured by the American Association of Individual Investors, has fallen sharply, to a level that, according to Suttmeier, “supports a tactical rally.”
The American Association of Individual Investors (AAII) Bulls vs. Bears ratio is nearly as oversold as it was at the February low. The 0.79 reading is below 1.0 and a tactical contrarian bullish (oversold) reading for individual investor sentiment. This supports the case for a tactical rally (see Chart Blast: Bulls make a stand & set up a tactical rally for US equities 16 April 2014). In our view, the drop in the NASDAQ is the trigger for this oversold AAII Bulls/Bears reading.
No chart tomorrow -- enjoy the three-day weekend!
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