Rhody Trader

I’m becoming increasingly convinced that traditional ways of viewing and interpreting market sentiment are no longer valid. There has always been a bit of “wise guy” element to reading market psychology. I’m referring here to looking at things like the covers of magazines, the views of pundits on television, what people talk about at cocktail parties, and all that.

It used to be that a major financial headline on the cover of a magazine like Time was a pretty good indication of the end of something. These days, though, the news cycles are so much faster that the media is on top of the things much more quickly. As a result, the public is aware much more rapdily than used to be the case.

On top of news and information dissemination happening much more rapidly, I think there’s more awareness of those sentiment readings. As a result, we’ve got this funky feedback mechanism where contrarian analysis is becoming a large part of what would have otherwise been the standard view of things. That means to a large degree there really isn’t a contrary view.

I think the only really meaningful sentiment reading is what people are actually doing. That shows up in prices, volume, and open interest, as well as in the Commitment of Traders data.

Trackback URI |