With the S&P 500, the Nasdaq, the Dow, the NYSE Composite — and plenty of other indexes around the world — pushing to fresh all-time highs week after week, you’d think investor sentiment would be improving, right?
Take a second and check yourself: Has your outlook on stocks actually gotten more bullish since the start of the year?
The American Association of Individual Investors (AAII) asked its members that exact same question this week. (I added the part about all the all-time highs, because, oddly enough, they left that out.)
The results were stunning: Only 15% of members said they’ve become more bullish.
Meanwhile, roughly two-thirds said they’ve actually grown more cautious — or flat-out bearish.
Two-thirds! While markets are ripping to record highs…
Sentiment Data This Week
Here’s what the poll looks like with the responses.
This screenshot comes directly from the AAII Sentiment Survey page that they post on their website every Thursday.
I couldn’t believe it when I saw these responses, especially considering the historic year stocks are currently having.
Meanwhile, each week AAII asks the big question, which has made this survey such a staple over the years: Do you think the stock market will be higher, lower, or about the same over the next six months?
And here’s the kicker: This marks the fifth straight week where more respondents admitted to being bearish than bullish.
Five weeks in a row. More bears than bulls.
How does that even happen? Are we all looking at the same market?
For me, this disconnect only makes sense once you put it into the broader context of the noise out there.
Headlines, narratives, and Twitter hot-takes are pounding investors with fear, even while the data — the price action — keeps telling a completely different story.
Signs of a Top Everywhere
One theme I keep noticing is market professionals swearing they “see signs of a top everywhere.”
I hear it so often now that I can’t help but wonder: Are these folks looking at their charts upside down?
Because here’s what I see — and, trust me, I probably look at more charts in a week than just about anyone on the planet — I see bottoms, not tops.
Take a look at these three charts. These aren’t obscure tickers or niche indexes — they’re arguably three of the most important stock market benchmarks in the world.
So let me ask you: Do these look like “signs of a top”? Or do they look like massive, powerful bases breaking higher?
You can see it in the Russell 2000 Small-Cap Index (IWM), coiling for a massive multi-year breakout.
You can see it in the Dow Jones Transportation Average (DJT), which we covered earlier this week.
And you can see it internationally, with the All Country World Index ex-U.S. (ACWX) already breaking out to new all-time highs.
Do those look like “signs of a top” to you? Or do they look like the foundations of a much bigger move higher?
That’s the funny thing about sentiment right now. Two-thirds of investors in the AAII survey say they’ve grown more cautious or bearish this year, despite record highs across the major indexes. Five straight weeks of more bears than bulls — while the market itself keeps ripping.
To me, that’s not a warning. That’s an opportunity.
I love when people are this wrong. It means the path higher is being fueled by skepticism. It means uptrends still have plenty of doubters to prove wrong.
As Billionaire Investor Charlie Munger once put it: “If people weren’t wrong so often, we wouldn’t be so rich.”
Exactly.
He was explaining that his and Warren Buffett’s success came from their ability to capitalize on market inefficiencies created by other investors’ widespread errors in judgment.
That’s the whole philosophy behind this note. When everybody’s wrong, we don’t panic — we profit.
And, right now, it looks like everybody’s wrong again.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs