In the last issue, we covered why a sentiment indicator should work. Now it’s time to look at a practical application. In sentiment indicators, the history being repeated is the unchanging nature of human emotion. Greed and fear drive the markets and they are measurable to some degree. A widely available is the American Association of Individual Investors (AAII) Sentiment Survey. This is a survey of individual investors which answers the question of how they feel about the market each week. Data from 1987 is available at http://www.aaii.com/files/surveys/sentiment.xls. A small part of the survey results from 2000 is shown below….