Are you one of the bears? I bet the chance is high that you are. At least what I have heard from various people is bearish, down-beat bearish these days! Below is the info I have got that is showing a widespread historical pessimism seen right now. If you know me, you probably won't be surprised to hear that I'm increasingly bullish now. To be clear, I'm not saying that I expect to see an immediate market rally to new highs. Not at all. Actually we may very well see some severe market low testing again during the bottoming process. But overall as a trend, I think we have likely seen the worst and we may soon see some significant turnaround. It is the time to position as such now.
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The AAII sentiment survey recently hit its most bearish reading since March 2009...
An incredible 59% of respondents were bearish. In the following graphic, you can see how rare this reading is...
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So the million-dollar question is, how do stocks perform after these extreme bearish readings?
We've seen 72 instances where the bearish reading has registered 50% or higher dating back to 1987.
On average, stocks are 7% higher after six months, 10% higher after a year, and 20% higher after two years.
And the results are even better than that if you look at the four other times when the reading was this bearish...
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As you can see, stocks were up an incredible 20% six months later, 33% a year later, and 46% two years later.
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