Bulls and Bears: Ritholtz Chart

What the ratio of bulls to bears tells about the market.


Stephen Suttmeier, a technical research analyst at Bank of America Merrill Lynch, yesterday sent out a note regarding sentiment readings (See the chart above). The ratio of bulls to bears, as measured by the American Association of Individual Investors, has fallen sharply, to a level that, according to Suttmeier, "supports a tactical rally."

He writes:

The American Association of Individual Investors (AAII) Bulls vs. Bears ratio is nearly as oversold as it was at the February low. The 0.79 reading is below 1.0 and a tactical contrarian bullish (oversold) reading for individual investor sentiment. This supports the case for a tactical rally (see Chart Blast: Bulls make a stand & set up a tactical rally for US equities 16 April 2014). In our view, the drop in the NASDAQ is the trigger for this oversold AAII Bulls/Bears reading.

No chart tomorrow -- enjoy the three-day weekend!

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    To contact the author on this story:
    Barry L Ritholtz at britholtz3@bloomberg.net

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