AAII Asset Allocation Survey
AAII Asset Allocation Survey – Equity allocation % deviation from 23yr. mean (Monthly Chart)
chart courtesy of FusionIQ
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Liquidity is a powerful tool. Given liquidity goes hand in hand with sentiment liquidity tends to be at its highest when equities are at their lows and investor sentiment is extremely dour; conversely liquidity tends to be at its lowest when stocks are at their highs and investors are exuberant.
As seen above the recent correction saw equities get almost back to a 5.00 % allocation above the mean allocation, typically this is an area vulnerable to shallow corrections. Hence it was not a surprise to see a minor pullback recently.
Currently individual investor allocations toward equities is slightly below the mean, which puts us in a zone where though reduced, buying power is still somewhat ample. With buying power relatively strong and the AAII Bull Sentiment Survey still at a relatively neutral reading it’s hard to see a big correction here.
What may be a likely scenario is as follows: the market continues to move up and investors, even the non believers, become triggered to chase stocks, putting their last bit of buying power into the market.
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March 11th, 2010 at 2:54 pm
barry, the AAII chart time line ends at Dec 2008, last I looked we are at Mar 2010.
So did you load up the latest AAII chart ??
March 11th, 2010 at 3:25 pm
Icm63
Read the chart again and check the months on the bottom. Whoops.
Kind of funky, but current .
If you want a shorter time frame become a Fusion IQ customer.
March 11th, 2010 at 3:26 pm
icm63: Chart reads December 2010 as last collection if you take a more careful look at scaling. Data is sampled 2x per year.
March 11th, 2010 at 3:35 pm
Still the same crappy, superficial analysis as before regarding this chart.
Anyway, I have got the impression FusionIQ have become more and more bullish the further the rally has progressed since its start a year ago. I wonder whether and when this turns out to be a good contrarian indicator.
rc
~~~
BR: What made you believe that?
In March of 2009, we discussed covering shorts in anticipation of “The Mother of all Bear Market rallies.”
Since then, we called for minor pullbacks in September and January, but said we saw no evidence the rally was over. I have also shown a composite bear market chart that details the median run — about 70% over 24 months, followed by a 25% correction over 13 months. That’s the median, you can see greater or lesser rallies.
We continue to give the market the benefit of the doubt, but we expect the turn to take place as the Fed gets closer to withdrawing their accommodation/ZIRP.
March 11th, 2010 at 3:50 pm
Impressive asinine statement Rootless.
Barry has been proven correct over the last year in a majority of his calls, so I’ll bet you even money on this one.
So per this post: My bet is that the current correction doesn’t go another 10% into a major correction.
How much you putting up?
March 11th, 2010 at 4:06 pm
Teaser close today at spx 1149.999999 – you get the idea. I say we grind higher from here for a while yet.
March 11th, 2010 at 5:09 pm
@The Window Washer:
“Impressive asinine statement Rootless.”
If you say so. I have provided comprehensive criticism to the interpretation of the chart and its underlying assumptions here before. I don’t need to repeat myself. Next time, I only will do it for a fee. I suppose you can explain to me what about my criticism before was “asinine”.
“Barry has been proven correct over the last year in a majority of his calls,…”
Well, the post wasn’t by Barry. Anyway, sure. Barry has been correct with his majority of calls. If one is sufficiently vague so that the range of probable outcomes is covered well, the probability to be proven wrong is low.
“So per this post: My bet is that the current correction doesn’t go another 10% into a major correction.
How much you putting up?”
Nothing. Why should I place a bet on a non-predictable outcome? I didn’t say the stock market is going to go down from here and now. I don’t have any knowledge where it is going. I said the analysis in the post was crappy and superficial. It’s a logical fallacy to believe that a right call about the direction proves the reasoning for the call correct.
For instance, the mean allocation, which is supposed to be the normal, is based on the mean of the recent 23 years. That is, it’s the mean over the time period of the credit market bubble. What if we took a much longer time period? Would the mean allocation be the same? I very much doubt that. But if this is the case any interpretation regarding the deviation from the normal, that confines itself to the last 23 years and their “normal” is worthless.
There are other things as well. I already wrote about them before.
rc
March 11th, 2010 at 5:43 pm
First, I really don’t do forecasts. I have no idea what is ever going to happen next — neither does anyone else.
On rare occasions (like March 2009) when it becomes clear we are dramatic extremes, I’ll say something pithy (i.e., Mother of all bear market rallies)
Second, I try to explain our positions in terms of probabilities — because that is all anyone can honestly do. Anyone who insists THIS or THAT is going to happen isn’t worth listening, as they are ignorant of market history.
Third, I attempt to see all sides of the argument, and explain which I find more compelling. If that’s vague, well then so be it . . .
March 11th, 2010 at 6:47 pm
Rootless.
Correct I was using the Royal Barry for Fusion IQ. Barry did not do the post I’m presuming the poster is an IQ employee.
Your asinine statement.
“Still the same crappy, superficial analysis as before regarding this chart.”
And I’d say: Worse crappy comment regarding this chart.
This is a blog post: You’re an ass because you’re whining about not having the complete technical analyses you desire put up. You’re seeing the free part of the analysis, which may be superficial, but it doesn’t make it crappy.
I’ll leave the rest to the royal Barry.
March 11th, 2010 at 10:24 pm
@The Window Washer:
“This is a blog post: You’re an ass because you’re whining about not having the complete technical analyses you desire put up.”
You don’t even try to refute the one of the points, the one I mentioned, that make the interpretation of the chart as basis for the bullish call flawed. You just resort to plain lying and insult instead. I didn’t say anything like what you claim here. That’s just pathetic.
“You’re seeing the free part of the analysis, which may be superficial, but it doesn’t make it crappy.”
I reply to what is made public. I don’t care whether there is some un-free part that has more substance, allegedly. Why should I?
“I’ll leave the rest to the royal Barry.”
I don’t know whether he even likes zealots.
rc
March 11th, 2010 at 11:31 pm
Barry,
“What made you believe that? ”
You have said a lot in the course of one year. Something for almost everyone. There would be needed a systematic analysis of all your statements whether there has been a shift in the average bias in these with respect to bullishness. I don’t have this analysis available. Therefore I only can talk about my impression, which is subjective.
You called for a technical bear market rally in March last year. This is the starting point, but my impression is you emphasized fundamentals much more regarding sustainability of the rally during the following months. For instance, I see much more skepticism in this post from August 2009,
http://www.ritholtz.com/blog/2009/08/overdue-market-correction-begins/
than I have seen recently from you. Fundamentals seem to have mattered less recently as basis for your calls, and technicals and sentiments have become more important. Now, in the post above, although not directly by you, a quite bold bullish call is made that the rally likely won’t end before also the skeptical ones have capitulated and bought into it, based on some weak, logically flawed interpretation of the AAII chart. I wonder, shouldn’t it be the other way around? The greater the discrepancy between reality and perception of reality by investors and the further the rally progresses the higher the probability for that fundamentals will finally prevail and the stock market crashes back to much lower levels?
As for the composite bear market chart. Yes, I remember this post. You also made an arrow where “we” were at this point. The problem is it’s very dangerous to really want to make predictions based on this composite, since the individual realizations that make up the composite vary a lot. One can’t predict an individual realization from the mean of a statistical population. The individual realization can be very different from the composite and probably will be. So one can’t really say where “we” are with respect to the individual realization, i.e., the current secular bear market, based on the composite of all bear markets.
rc
March 12th, 2010 at 11:56 am
[...] Individual investors still have some buying power left. (Big Picture) [...]
March 13th, 2010 at 9:03 pm
I don’t see how this chart could be used effectively to signal a market top. If you look closely you will see it got up into the “tapped out” zone 4 years before the 2000 market top and 3 years before the 2007 market top. By that metric it would appear that since were aren’t even at the tapped out level yet that we have at least 3+ years of bull market left to go and quite possibly more.
In short this indicator seems much more timely for spotting bottoms in which case is is usually one a few months early.
March 15th, 2010 at 1:32 am
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