Investors are nervous.

That’s not just a guess or some kind of “gut” feeling. I know they’re nervous based on the data in the investor survey I shared with you last week. The past three weeks of data are shown in the chart below.

Source: AAII

This chart shows the latest results of the weekly survey of the American Association of Individual Investors, or AAII, compared to the results from earlier this month.

As I explained last week, AAII has conducted the same survey every week since 1987. There’s just one question in the survey — are you bullish, bearish or neutral about the next six months?

How One Question Reveals So Much About The Market

This survey’s long history allows us to test the usefulness of the data. That history shows the percentage of investors who are neutral is the most reliable indicator of future market action.

Initially, this might not seem like it makes much sense. But neutral investors are the ones with cash on the sidelines and looking for an opportunity to put that money to work. They are potential buyers.

Bears are unlikely to buy since they expect additional declines. Bulls are unlikely to buy since they are most likely already invested. That confirms that neutral investors could be the most useful group to track.

Take another look at that first chart. The most important data it gives us is the lack of conviction in the bulls. The large increase in the bulls seen in the survey results for the week ending November 11 was driven by news of a vaccine. A small selloff led to about two-thirds of that number reversing course.

Rapid changes in the percentage of bulls shows anxiety is high. One week, investors have a fear of missing out on additional gains. The next week, they have a fear of falling prices. This anxiety is likely to continue.

This week, however, strong seasonal trends are likely to drive prices up for a few days.

Take Advantage Of The Holiday Bulls

We often see bullish price moves around holidays. In an average week over the past 20 years, the S&P 500 was up 58.3% of the time with an average gain of 0.2%. In Thanksgiving week, the probability of a gain rises to 80% and the size of the average gain increases to 1.5%.

Last week’s price action adds to the bullish outlook for this week. SPDR S&P 500 ETF (NYSE: SPY) closed near the week’s low.

In the past 20 years, SPY rallied 74.2% of the weeks that followed the index closing within 10% of the week’s low. This most recent close also coincides with support, the low seen on November 9 after the initial vaccine-news rally.

In the long run, the stock market faces a number of challenges. But for this week, a number of factors point to a short-term rally.

Now, there’s definitely money to be made by running alongside these holiday bulls on parade. That’s how powerful a force they are this week.

If you’re going to trade the expected Thanksgiving rally, you need to remember this one thing: The New York Stock Exchange closes at 1:00 PM EST on Friday. That’s important because there is a strong bearish bias for the Monday after Thanksgiving. This indicates it could be best to close out any holiday trades on Friday.

So, this week only, run with the bulls… the odds are overwhelmingly in their camp. But close out your Thanksgiving rally trades before the early closing bell on Friday or risk losing those profits when reality sets in on Monday.

And speaking of snapping back to reality…

Focusing on the long run, I remain in the bearish camp and see little upside potential in the current stock market.

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