How American Association of Individual Investors (AAII) Sentiment Survey Works as a Contrarian Indicator

According to Wikipedia, the free encyclopedia, American Association of Individual Investors (AAII) is a nonprofit organization whose purpose is to educate individual investors regarding stock market portfolio, financial planning, and retirement accounts.

AAII’s Sentiment Survey, which is surveyed on its members’ view (bullish, bearish or neural) opinion where the general market will be at. It is released weekly. This reading is treated as one of the best of contrarian indicators. It is similar to the technical indicator ISE Sentiment Index (ISEE) which is measured on the retail investors, and is considered as a contrarian indicator.

The above figure shows 43% of AAII’s members present bullish view of the stock market in the six month. On the other hand, 29% members reveal bearish view.

According to our trading log, bullish sentiment greater than 45% is treated as a high reading. The AAII bullish percentage reached 55% last week. This kind of level had not been seen for long time. It might foreshadow a temporary reversal. However, we need to combine AAII sentiment survey with other technical indicators to better gauge the market movement.

You can track AAII data by visiting the following website: http://www.aaii.com/

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