"Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions."
- Sun Tzu

Wednesday, January 18, 2012

AAII Sentiment Survey: So What?

Market pundits have been dissecting the latest AAII reading, which has been very high for the bulls.

Contrarians, such as Mark Hulbert don't buy the rally. If these "experts" would simply pull up a chart, they would quickly recognize, even without advanced quantitative analysis, that high bull readings did not have any predictive value in the last two years:



Even worse: you would have missed the entire 2010 rally, because bullish sentiment came in between 40 and 60 percent during the entire move (see chart).
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