Monthly AAII Portfolio Allocation remains Neutral & Weekly AAII Stock Sentiment declined to Neutral

 New Indicator Neutral: 
Monthly AAII Portfolio Allocation Survey

Old Indicator Neutral: 

Weekly AAII Stock Market Sentiment Survey

The September 2022 AAII Portfolio Allocation Survey reveals AAII investors are neutral based on their own investments. 

AAII investor Sentiment had very bearish on the stock market, in general, for the past two weeks. That made me very bullish for two weeks, using this as a contrary indicator.  And stock market averages went up a lot in those two weeks. This week's AAII Sentiment was not that bearish, so I have to interpret that as Neutral on the stock market.

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 also two weeks ago.  Those exceptions were unusual levels compared with historical data from 2005 through 2021.

I decided to substitute the monthly AAII Portfolio Allocation Survey, instead of the weekly AAII Stock Market Sentiment survey, as one of my seven EL Stock Market Timing Indicators index.

I'll 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 (rated as Bullish)

The 10/19/22 level was 56.2% bearish (rated as Bullish)

The 10.26.22 level was 45.7% bearish (rated as Neutral)

When these small investors are very bearish on the stock market (55% or more bearish), I have to be very bullish on the stock market, until the next week's data are available.

The actual 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 10/26/22: 

26.6% were Bullish  --  (under 20% is unusually low)
   (was 22,6% last week)

27.7% were Neutral
    (was 21,2%)

45.7% were Bearish  --  (over 55% is unusually high)

    (was 56.2%)

 DATA  NO  LONGER  USED  FOR  MARKET  TIMING:

Week Ending on October 26, 2022: 

= BULLISH

36.3% of AAII Investors were bullish 

(was 28.7% bullish =  BULLISH last week) 

 

Four  Week  Moving  Average: 

= BULLISH

30.5% of AAII Investors were bullish (unusually low)

(was 27.7% 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