Posts filed under “Sentiment”

Why Is It So Hard to Call a Market Top?

Each morning, I go through a similar routine: I wake up (no alarm clock), go to the kitchen to get a cup of coffee (this is my machine of choice lately), launch a script that opens 40 or so Firefox tabs. As part of my morning research, I quickly scan this series of websites to see what happened over night, and what might be interesting.

Part of that list is Jason Zweig’s “This Day in Financial History,” which led to this morning’s gem: Today in 1997:

The Dow Jones Industrial Average closes above 7,500 for the first time, and The Wall Street Journal notes that the market’s climb ‘seems to inspire equal parts awe and dread among many investors.’ Fred Taylor, CIO at U.S. Trust, guesses that the stock market will end the year “lower than its current level.” (The Dow finishes 1997 at 7908.25, or more than 5% higher.)

Which leads to today’s question: Why is calling a top so much more challenging than seeing a market bottom?

I don’t think many traders would disagree with that notion. It is often said that “Tops are a process while market bottoms are an event.” Or as Michael Batnick observed, “Bull market tops are more difficult to call than bear market bottoms because doubt is a far more resilient emotion than hope.”

Allow me to rephrase that without any of the lovely subtlety I am known for: The dominant emotion at bottoms is fear — a palpable and very recognizable state. Tops on the other hand, come about through the combination of greed, complacency and indifference. This is a much more challenging set of factors to identify. Indifference does not cause a huge spike in VIX, a standard measure of market volatility; volume does not increase as traders become complacent.

There are many other forces at play: Continues here

Category: Investing, Sentiment, Short Selling, Technical Analysis, Trading

A Bear Market for Mom & Pop Investors

Last year, we noted that there was a “Bubble in Bubble Calling.” News media bubble chatter was the rage, whether it was tech initial public offerings or stocks or bonds — all caused by “a global central bank QE bubble.” Here we are two quarters later, with the central bank reducing quantitative easing by scaling…Read More

Category: Investing, Markets, Psychology, Sentiment

Do You See the Positives or Negatives?

The Standard & Poor’s 500 Index hit an all-time high yesterday, closing at 1,897.45. The Dow Jones Industrial Average also hit a record, ending at 16,715.44. This should be tempered by noting that the Dow is up less than 1 percent so far this year, while the S&P 500 has gained about 2.7 percent. One…Read More

Category: Data Analysis, Earnings, Psychology, Sentiment, Valuation

Today in Bubble History: eToys IPO

Is today like 1999? Consider: 1999: eToys Inc., a startup Internet retailer, goes public on NASDAQ. Initially expected to be priced at $10-$12 per share, the stock is underwritten at $20 and quadruples before the opening bell can even ring. The first trade is at an astonishing $83 9/16. The shares close the day at…Read More

Category: Bubbles, IPOs, Sentiment

U.S. Money Managers Are Cautiously Optimistic

From Barron’s big money poll; The mix of neutral and bearish managers at 44% seems high — I’d love to see that plotted over a long period on a chart.   Source: Barron’s

Category: Investing, Psychology, Sentiment

AAII Sentiment: Bulls & Bears

click for larger graphic continues here

Category: Digital Media, Sentiment

Using IPOs to Measure Investor Sentiment

Analyst Mark Hulbert recently raised the question of what the rate of initial public offerings means for the stock market. He looked at IPOs and dividends as a broad way to evaluate investor sentiment. He used a variety of different data points to gauge if stocks were in a bubble. He also drew on (among…Read More

Category: Investing, IPOs, Sentiment

Barron’s Unsentimental Investors

  Our monthly letter to clients was picked up and excerpted by Barron’s Market Watch: A Sampling of Advisory Opinion. This is the section of the commentary relating to investor sentiment: Unsentimental Investors April Insight by Ritholtz Wealth Management 90 Park Ave., New York, N.Y. 10016 April 2: Anyone who thinks stock market sentiment is…Read More

Category: Apprenticed Investor, Media, Sentiment

Big Data in Finance: Sentiment-extraction from News

Using big data in finance: Example of sentiment-extraction from news articles Nitish Sinha FEDS Notes, March 26, 2014     There is much discussion and research in finance on using “big data” to understand market “sentiment.” In this note, I will draw on some of my own research in behavioral finance–Sinha (2010) and Heston and…Read More

Category: Data Analysis, Federal Reserve, Sentiment

Why Minsky Matters

Click for radio segment.

Source: BBC Radio 4

Category: Cycles, Digital Media, Sentiment, Video