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INDIVIDUAL INVESTOR BEARS DIP, BUT STILL 'UNUSUALLY HIGH' - AAII

Individual investor pessimism over the short-term outlook for U.S. stocks pulled back in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this, optimism rose and neutral sentiment decreased.

Meanwhile, a little over a third of investors surveyed see stock valuations as mixed, while a little less than a third see stocks as overvalued.

AAII reported that bearish sentiment, or expectations that stock prices will fall over the next six months, dipped 3.0 percentage points to 58.9%. Bearish sentiment is "unusually high" and is above its historical average of 31.0% for the 19th time in 21 weeks.

Of note, this was the seventh week in a row that bearish sentiment has been above 50%. This matches the longest streak in the history of the survey with seven consecutive bearish sentiment prints above 50% around the time the S&P 500 index .SPX ended its Gulf War decline of 19.9% on a closing basis in October 1990.

Bullish sentiment, or expectations that stock prices will rise over the next six months, gained 6.8 percentage points to 28.5%. Bullish sentiment is below its historical average of 37.5% for the 13th time in 15 weeks.

Neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, declined 3.8 percentage points to 12.5%. Neutral sentiment is "unusually low" and is below its historical average of 31.5% for the 38th time in 40 weeks. Neutral sentiment was last lower on May 28, 2009, (11.0%) and was the 14th-lowest reading in the survey’s history

With these changes, the bull-bear spread gained about 10 percentage points to –30.4% from –40.2 last week. The spread is below its historical average of 6.5% for the 14th time in 16 weeks.

In this week's special question AAII asked its members how they would describe the current valuation of stocks.

Here is AAII's graphic showing how they responded:

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)