Monthly AAII Portfolio Allocation Survey is Neutral, but Weekly AAII Stock Market Sentiment is bullish for the second week

New Indicator: Monthly AAII Portfolio Allocation Survey

Old Indicator: Weekly AAII Stock Market Sentiment Survey

The new AAII Portfolio Allocation indicator has replaced the old AAII Sentiment indicator, which was incorrectly too bullish this year, with only two exceptions so far -- correctly very bullish at the market lows in June 2022, and last week.  Those exceptions were unusual levels compared with historical data from 2005 through 2021.

Last week I decided to use the monthly AAII investor portfolio allocation survey instead of the weekly AAII Investor stock market sentiment survey for my seven EL Stock Market Timing Indicators index.

The September 2022 AAII portfolio allocation survey reveals AAII investors are neutral based on their own investments. But they were very bearish on the stock market in general last week and this week -- and we are very bullish when they are very bearish !  

I'm going to keep tracking weekly AAII Sentiment this year to see if it works with a different interpretation of the data. I will be bullish only when I see an unusually large percentage of bearish AAII investors, as a contrary opinion. The buy signal will last for one-week because weekly data can be very volatile. My prior interpretation of the sentiment data, since 2005, used a four-week average of the percentage of bullish investors. That interpretation stopped working in 2022 -- it had been bullish all year.

Very bearish for AAII Sentiment means 55% or more AAII investors are bearish on the stock market. The 10/13/22 level was 55.9% bearish, and the 10.19.22 level was 56.2% bearish. Because these small investors are so bearish, I have to be bullish on the stock market, at least until next week's data are available on October 27, 2022.

The portfolios of these AAII investors in September had stock and stock mutual fund allocations of 63.4%. Although at a two-year low, the percentage of stocks and stock funds remained above the historical average of 61.5% for the 28th consecutive month. Allocations to stocks and stock funds were last lower in November 2020 (63.2%).

Being near the 61.5% average, I would call 63.4% "Neutral".  Based on the percentage of stocks claimed in their portfolios, AAII investors are nowhere near their bearish sentiment at market bottoms in the past -- with roughly 40% allocated to stocks at the 1990, 2002, and 2009 stock market lows.  Far below the current 63.4%.

Sources of data:

September AAII Asset Allocation Survey: Equity Exposure Modestly Declines | AAII

...... Economic Logic: AAII Sentiment -- another way to look at AAII data (el2017.blogspot.com)

https://www.aaii.com/sentimentsurvey/sent_results

NOTE: My SEVEN  STOCK  MARKET  TIMING  INDICATORS were:

BEARISH on September 30, 2022

...... Economic Logic: The ECONOMIC LOGIC stock market timing indicators remain Bearish at -4 (range is from -7 to +7) (el2017.blogspot.com)

BEARISH on August 21, 2022

...... Economic Logic: The ECONOMIC LOGIC stock market timing indicators remain Bearish at -4 1/2 (range from -7 to +7) (el2017.blogspot.com)

BEARISH on July 15, 2022

...... Economic Logic: The ECONOMIC LOGIC stock market timing indicators remain Bearish at -4 (range from -7 to +7) (el2017.blogspot.com)

 

My average of seven market timing indicators, predicting stock prices over the next 3 to 6 months, is more useful than this single short term sentiment indicator.

Data for the week ending 10/19/22: 

22.6% were Bullish  --  (under 20% is unusually low)
   (was 20.4% last week)

2,2% were Neutral
    (was 23.7%)

56,2% were Bearish  --  (over 55% is unusually high)

    (was 55.9%)

 

Week Ending on October 19, 2022: 

= BULLISH

28.7% of AAII Investors were bullish 

(was 26.7% bullish =  BULLISH last week) 

 

Four  Week  Moving  Average: 

= BULLISH

27.7% of AAII Investors were bullish (unusually low)

(was 25.9% bullish = BULLISH last week)

 

 

Recommended Portfolio Cash

percentage for short term traders: 

 = 0%

(was 0% cash last week)

 

 

AAII  Indicator  Analysis:

    ( over 80% is Bearish )

( 71% to 80% is Moderately Bearish )

( 50% to 70% is Neutral )

( 40% to 49% is Moderately Bullish ) 

  ( under 40% is Bullish