The composite Z-score of three major sentiment surveys—AAII Bulls, Investors Intelligence Bulls, and the NAAIM Exposure Index—just hit 0.72. That’s the highest reading of 2025 and marks a clear shift toward optimism.
Here’s the chart:
Let's break down what the chart shows:
The black line in the top panel shows the S&P 500 Index on a weekly closing basis.
The blue line in the lower panel shows the average Z-score of AAII Bulls, Investors Intelligence Bulls, and the NAAIM Exposure Index.
The Takeaway: For most of this year, sentiment has been playing catch-up. The S&P 500 has been breaking out for months, yet investors remained hesitant.
That gap is now closing.
Last week’s jump signals that the crowd is finally buying into the rally.
This is a notable psychological shift.
A reading of 0.72 lands in the 74th percentile of all weekly observations since 2011. That’s elevated, but far from euphoric.
Historical sentiment extremes don’t usually kick in until Z-scores rise above +1.4.
Right now, we’re in the sweet spot—bullish, but not crowded.
Since 2011, when the sentiment Z-score sits between 0.5 and 1.0, forward returns tend to stay strong.
In short, optimism at these levels is not something to fade—It’s a setup that has historically supported continued upside.
Sentiment-led pullbacks tend to emerge only after readings push into the extreme tail.
We’re not there.
This isn’t a red flag.
It’s confirmation.
Sentiment is finally in gear with price, not fighting it.
Breadth is strong,
Leadership is broadening, and the crowd is warming, not overheating.
If bullish sentiment continues to climb, we’ll reassess.
But here and now, the weight of evidence continues to favor higher prices through the back half of the year.
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