The American Association of Individual Investors survey (AAII) has a good record in signaling important lows. Despite the previous week’s large sell-off the survey showed optimism at a six-week high (the survey was completed prior to the Friday rally). That aberration should have been corrected last week. Instead, last week’s numbers show optimism surging and pessimism plunging again – implying that the 10/15/14 low was not an “important” low (the “buy the dips” mentality was stronger than any fear created by the market drop). With optimism already more than one standard deviation above average I am beginning to question my forecast for a bullish November. Equities may top out sooner than previously expected . It’s looking very possible that the next high may see equities drop to new lows.

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