On 22 September, the index flagship of the US market closed the session at 2,020 points in a historical record. But three weeks of uninterrupted declines brought him back in 1820 during the meeting of 15 October. Then, a rapid rise has enabled the S&P 500 to close yesterday at 2031, a new record.
No doubt, investors have regained enthusiasm they often demonstrated in 2014. In fact, according to figures released yesterday by the American Association of Individuals Investors (AAII), 52.7% of respondents to its weekly survey are in the camp of bulls, those who expect the index will be higher in six months. The historical average is 39%, and the result of 52.7% this week is the highest of the year.
As for the bears, the clan of the pessimists, the result is even more striking. Respondents believing that the markets will be lower in six months are more than 15%. The historical average is 30.5%. The current level is the lowest since 2005.
The results of this survey AAII are often used as a contrarian indicator. That is to say that the more optimistic they are, the greater should be wary, said Anora Mahmudova reporter for MarketWatch site.
The theory of contrary opinion is based on the principle that most of those who declare themselves optimistic about the outlook for equity markets have probably bought all the shares that their portfolios can contain. There were therefore at that time much less buyers to push the market higher. Result: when the AAII survey reveals a high level of optimism, a decline in stock prices becomes more likely.
Supporters of this theory of contrary opinion recall that in March 2009, at the height of the financial crisis while the S&P 500 touched 666, the AAII survey displayed 70% bears. They are no more than 15% today while the index is three times higher.
Those who are wary of this excess enthusiasm turn to indicators for caution. Among them, Martin Hayes, president of Market Extremes, an investment consulting firm in New York.
According to him, the rally of recent weeks depicts the reality less shiny than it seems. When bull markets prevail, it is not unusual that the volume of securities transactions on the rise is 9 times higher than the volume of securities down. This phenomenon is called the rule of 9 to 1. There was no instance where this rule could be applied in the last 3 weeks, says the consultant. So the rally lacks conviction, he added.