Morning Notes — Record Bearish Sentiment

Bearish equity sentiment as measured by the American Association of Individual Investors (AAII) weekly sentiment poll reached an all-time record of 52.07 on March 26, 2020. The S&P made a cycle low two days earlier on March 23, 2020. It’s a weekly survey so it tends to lag by a few days. The previous record of 50.30 was made on December 27, 2018. Again, the S&P 500 made a cycle low two trading days earlier on December 24, 2018. Extreme levels of bearish equity sentiment is a very strong contrarian buy signal. And today’s release of AAII sentiment for the week ending 5/6/20 came with a new (believe it or not), all-time record bearish extreme of 52.66. The S&P 500 has rallied +30% from the 3/23/20 low and this kind of sentiment reading only provides more fuel…lots of fuel.