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By Charles Rotblut, CFA, AAII

Bullish sentiment rebounded, while bearish sentiment fell to a level not seen since last January in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 4.6 percentage points to 44.7%. This is the highest percentage of optimism since February 17, 2011. This is also the third consecutive week that bullish sentiment has been above its historical average of 39%.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, edged up 0.5 percentage points to 30.7%. The historical average is 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 5.1 percentage points to 24.6%. This is the lowest level of pessimism since January 13, 2011. Bearish sentiment has now been below its historical average for three consecutive weeks.

Many respondents took this week’s survey before yesterday’s 389-point drop in the Dow. Thus the results reflect optimism caused by the rebound that stock prices had been experiencing. Even with the improvement in bullish sentiment, individual investors remain cautious, however, given the events in Europe, the slow level of U.S. economic growth, and Washington politics.

In honor of this week’s AAII Conference, which is being held in Las Vegas, we asked AAII members who their favorite Vegas act was (past or present). Elvis Presley and Circ de Soleil received the most votes.

This week’s AAII Sentiment Survey results:
· Bullish: 44.7%, up 4.6 percentage points
· Neutral: 30.7%, up 0.5 percentage points
· Bearish: 24.6%, down 5.1 percentage points

Historical averages:
· Bullish: 39%
· Neutral: 31%
· Bearish: 30%

(chart provided by pragcap.com)