August brought many investors back to reality following July’s market rebound, as the markets continued their summer carnival ride. The Wilshire 5000 dipped nearly 5% as renewed worries of a double-dip recession weighed heavily on the markets. Investors were in full swoon as well, as bullish sentiment in AAII’s Sentiment Survey dropped to 20.7% for the week ending August 26, 2010. This marked the lowest level in bullish sentiment since early March 2009, which also coincided with the market bottom following the global financial crisis of 2008. This was the second time in as many months that bullish sentiment reached such low levels, as investors digest conflicting data about the direction of the economy and, ultimately, the markets.                                                                                                                   

As we go to press, investors seem to be feeling a sense of renewal at the start of a new month. On the first trading day of September, there was a broadbased surge in the markets, as manufacturing data surpassed expectations and eased doubts of a double-dip—at least in manufacturing. Granted, this is only one day out of 21 trading days in the month, so anything can happen. Better-than-expected readings from the housing market and retail segment on Thursday are encouraging signs going forward as well. Jobs data could go a long way to either confirming that the fragile economic recovery is gaining strength, or it could further muddy the waters.

Results as of September 2, 2010:

Bullish: 30.8%

Neutral: 27.0%

Bearish: 42.2%

To participate in the AAII Sentiment Survey, or to view historical survey results, click on the link below:

https://www.aaii.com/sentimentsurvey

Long-Term Average and Extreme Values

Bullish:

 Average: 38.9%, Max: 75.0% (1/6/2000), Min: 12.0% (11/16/1990)

Neutral:

 Average: 30.8%, Max: 62.0% (6/3/1988), Min: 7.7% (12/14/2000)

Bearish:

 Average: 30.4%, Max: 70.3% (3/5/2009), Min: 6.0% (8/21/1987)