By Seeking Delta of http://seekingdelta.wordpress.com
Both the NAAIM (active money managers) and AAII (individual investors) sentiment surveys released this week show a spike in bullish sentiment. The biggest increase in bullish sentiment came in the AAII survey where the bullish reading jumped to 58% from 48% last week. This is the highest level since January 2007.
This week, active managers have, on average, a 72% allocation to equities. This is up from 70% last week. The median allocation jumped to 97% while the top quartile of active managers have an allocation of 100% or greater to equities with the bottom quartile at a 65% or less equity exposure. The eight week moving average continued its uptrend, now at 67%.
The NAAIM number measures current equity exposure (0% would be all cash, 100% fully invested). Additional detail can be found here.
After last week’s decrease in bullish sentiment, this week we see a large jump in the individual survey conducted by AAII. Individual investors increased their bullish sentiment for the next six months from 48% last week to 58% this week. Bearish sentiment also declined slightly to 28.5% from last week’s reading of 29.8% which means the large increase in bullish sentiment came almost entirely from a decrease in neutral sentiment. Individual investors are becoming more polarized with neutral sentiment at 14%, the lowest level in May of 2009. The Bull-Bear spread reached 29% and the eight week moving average increased to 49%, which is the highest level since January 2005.
Individual investor sentiment is well into the “extreme” territory (measured as one standard deviation above average) and is near the 60% level which would be a two standard deviation eveny with the NAAIM survey also approaching the “extreme” category.