Current market sentiment and crowd psychology

Discussion in 'Psychology' started by detective, May 11, 2009.

  1. Here are a few things to think about when viewing the markets over the past few months:

    1) Markets tend to churn at the top end of a trading range when investors are eager to buy a pullback but unwilling to buy at current prices.

    2) Markets accelerate to the upside during uptrends when there is an acceptance of the uptrend, not when there is a wall of worry.

    3) No one wants to buy the top, but many want to buy a pullback, when the pullbacks continue to be shallow, the trend is not vulnerable, and likely to continue, deep pullbacks within a long uptrend (more than 1 month) are signs of topping and signal a trend reversal a few weeks to months down the line. Healthy pullbacks is an oxymoron, the more pullbacks and recoveries, the weaker the uptrend. Strong markets do not let you in.

    4) The long term trend is the final determinant in whether an intermediate trend is likely to last or not. An intermediate uptrend in a long term downtrend is a deadly point to get in on the long side, and often leads to buying near tops.


    #1 is applicable now in May, and #2 was applicable in March and April. #3 and #4 will be applicable in the coming months.