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 decline in bullish sentiment. The biggest decrease in bullish sentiment came in the AAII survey where the bullish reading plummeted to 40% from 58% last week. The NAAIM survey showed a more modest pullback.

naaim sentiment survey and returns of the s&p 500
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This week, active managers have, on average, a 67% allocation to equities. This is down from 71% last week. The median allocation fell to 80% while the top quartile of active managers have an allocation of 100% or greater to equities with the bottom quartile at a 50% or less equity exposure. The eight week moving average continued its uptrend, now at 69%.

The NAAIM number measures current equity exposure (0% would be all cash, 100% fully invested). Additional detail can be found here.

aaii investor sentiment percentage bullishIndividual investor’s sentiment continued to be volatile with bullish readings over the last three weeks at 48%, 58% and 40% respectively.  Bearish sentiment also increased slightly to 32.5% from last week’s reading of 28.5% which means the large decrease in bullish sentiment came almost entirely from an increase in neutral sentiment. The Bull-Bear spread is at 7.5% and the eight week moving average decrease, for the first time in 12 weeks, to 48%.

aaii investor sentiment percentage bullish
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I have included a new chart this week that shows each category as a percentage of the total.

Individual investor sentiment and NAAIM sentiment are now below the “extreme” territory (measured as one standard deviation above average.

For analysis of the subsequent equity returns based on sentiment surveys please see the flowing links. AAII research here and NAAIM research here.