Investors extend their bullish sentiment by another week. It is interesting to note that optimism has not been as high for almost an entire year (the last time investors sticked to the 50% mark was the week ending February 10, 2011).

This week’s special question asked AAII members what factors are causing them to be bullish, neutral or bearish. Respondents credited signs of an improving economy followed by better corporate earnings as the primary reasons for their optimism. Bearish respondents most frequently cited Europe’s sovereign debt problems, followed by the economy, the federal deficit and Washington politics.

The specific results of this week’s survey are as follows:

• Bullish: 48.4%, +1.2
• Neutral: 32.7%,+3.5
• Bearish: 18.9%, -4.7

While the bullish sentiment retreated sightly, the S&P 500 is continuing its way higher. Financial markets worldwide appear to be leaving the preceding years of crises behind and looking ahead with renewed optimism.

Yesterday, the Investment Company Institute (ICI) said domestic stock funds experienced their first week of net inflows since last August. Even Mark Hulbert’s Stock Newsletter Sentiment Index (HSNSI) is showing that market timers expect stock prices to rise.

As you know, stocks have started the year off on the right foot. In fact, the S&P 500 is enjoying its best early January performance since 1987, according to Bloomberg. The index is also extending a 17% rebound that started in early October.

Here is the sentiment’s survey result for the week ending January 18:

• Bullish: 47.2%, -1.9
• Neutral: 29.2%, -4.5
• Bearish: 23.6%, +6.4

Bullish sentiment remains at elevated levels of around 50%, but it does not necessarily mean that the S&P 500 cannot go further higher. It happened often enough in the past that markets could continue its rally, while the mood cooled down at the same time. What remains striking is the fact that markets tend to reverse when bullish sentiment reaches 50% (top) or 25% (bottom).

• Bullish: 49.1%, +0.3
• Neutral: 33.7%, -0.3
• Bearish: 17.2%, ±0.0

Every Wednesday, the American Association of Individual Investors (AAII) surveys the bias on the stock market for the next six months. Participants can only answer bullish, bearish, and neutral. Here is the survey result for the week ending January 4, 2012:

• Bullish: 48.9%, +8.3
• Neutral: 34.0%, +5.4
• Bearish: 17.2%, -13.7