S&P 500: Market Sentiment Sinks Along With Stock Prices - A Contrarian Indicator?
Persistent worries regarding war, inflation, the possibility of a recession, and fluctuating interest rates have cast a pall of uncertainty over the market.
The most recent AAII Investor Sentiment Survey, a contrarian indicator, paints a picture of declining bullish sentiment within the S&P 500. Only 29.3% of respondents expressed bullish sentiment this week, a notable decline from the 34.1% reported in the previous week.
This downtrend aligns with the recent decline that brought prices back to levels last seen in April 2022.
Notably, the range of 4150 to 4135 carries significant psychological weight, forming a fundamental level that has proven to be formidable resistance in the past, making it a critical threshold not to be breached.
During that period, the index experienced a decrease of approximately 1%.
The AAII survey indicates a pronounced shift in sentiment. When compared to the NAAIM index, which mirrors fund managers' equity exposure, this shift is even more notable.
The NAAIM index has dipped below its March 2022 level and is regressing to the levels observed in October 2022.
The NAAIM exposure index is not predictive in nature, but the main objective is to provide information on the actual adjustments, as far as the stock market is concerned, made by active risk managers to client accounts over the past two weeks.
Here is the general sentiment:
The indexes in fact have begun a significant retracement. But declines create opportunities. Looking graphically at «the magnificent 7» they are well off their highs with RSI (oversold) lows.
Taking Apple (NASDAQ:AAPL) as an example first, it is down more than 15% from its high, below the main 200 moving average, with RSI at its lows (oversold) and the creation of a
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