“Nothing like price to change sentiment.”
— Helene Meisler
Sentiment in the stock market refers to its mood, whether investors are optimistic or pessimistic. Sentiment indicators are used to quantify and measure the market’s state of mind.
The notion is that retail investors are a contrary indicator, buying when bullish sentiment has peaked and selling when bearish sentiment has reached its summit.
Overly optimistic or pessimistic readings can point to coming price reversals.
Sentiment indicators can be used as an arrow in your quiver, helping you to target your trades.
The current 10-week rally in stocks is swinging sentiment toward an extreme. That is worth considering.
Happy Friday and here’s to heading to the weekend in a good mood.