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Small investors feel -- what else? -- gloomy

September 27, 2011 |  7:21 am


Individual investors feel less than optimistic these days.

Bullish sentiment among small investors is nearing its lowest level since the end of the global financial crisis in 2009, according to one barometer.

Barely one-quarter of individual investors feel the stock market will be higher six months from now, according to a weekly sentiment gauge published by the American Assn. of Individual Investors.

The 25.3% reading registered Thursday is the sixth-lowest since March 2009, when it hit 18.9%. The long-term average is 39%.

The lowest post-crisis reading was 20.7% in August 2010. Most of the other post-crisis lows have been in the 24% range.

In the same vein, bearishness among small investors also has risen, to 48%, well above its 30% historical average.

Other measures show heightened bearishness.

As my colleague, Tom Petruno, pointed out Monday, “short interest” -- the number of shares borrowed and sold, typically in a bet that prices will drop -- jumped in mid-September to the highest level since March 2009 on the New York Stock Exchange.

As with many sentiment readings, of course, the small-investor gauge is considered by many Wall Street pros to be a contrarian indicator, meaning that the gloomier small fry feel, the likelier stocks are to launch into a rally.

The 18.9% reading in March 2009 was the lowest of the bear market that accompanied the financial crisis. It came on March 5, just days before stocks broke out of their doldrums and set off on the ensuing bull market.

And just to show how much individual investors follow trends, rather than anticipate them, bullishness more than doubled, to 45.1%, two weeks after hitting that low.


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Photo: Wall Street's infamous bronze bull peers down an empty Broadway near Wall Street during Hurricane Irene last month. Credit: Stan Honda/Getty Images

-- Walter Hamilton