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Archive - Feb 19, 2012

Elmwood Data's picture

Farrell Sentiment Index

Submitted by Elmwood Data on 02/19/2012 03:10 -0500



In this chart and analysis, we compare the S&P 500 (black line) to the American Association of Individual Investors (AAII) weekly survey. The AAII reports their respondents in three categories: bullish, bearish, and neutral. To analyze these AAII statistics, we create the “Farrell Sentiment Index,” defined as the number of bulls, divided by the number of bears, plus .5x the number of neutrals = Bulls/(Bears+.5Neutrals). This data can be quite volatile week to week, so we opted to convert this formulaic data series into two different types of charts.

 
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