At the start of the month, I highlighted horrible equity market sentiment
Market Sentiment
Market sentiment is a psychological attitude that captures the mood and attitude of investors, usually towards a specific security or asset. This sentiment can be segregated into a bullish or bearish mood in the market. As such, certain trading activity or price behavior will also impact market sentiment.For example, bullish sentiment indicates a growth in the price of securities, whereas a bearish sentiment sees falling prices. Many traders use broader market sentiment or sentiment data to help identify trends that may not seem apparent to many other investors.This can give way to investor sentiment indices or contrarian signals surrounding assets, which helps inform investors to make more educated decisions.Using Market Sentiment Market sentiment is not always grounded in fundamentals and for this reason is seen as inferior to other methods trading. This form of investing instead deals with emotion and feelings of traders.However, many traders, specifically shorter-term investors, will rely on market sentiment. Sentiment traders put a lot of merit into these trends, just as other investors look for specific signals or fundamental barometers to inform their decision making.This is due to the powerful impact of sentiment on short-term indicators or attitudes. Many investors also prefer taking contrarian views and positions, actively trading against an engrained market consensus.In this instance, if the broader market is buying a security, a contrarian investor would instead sell, and vice versa.This is a popular technique in the stock market, which can characterize stocks as either over or undervalued, based in large part by market sentiment.
Market sentiment is a psychological attitude that captures the mood and attitude of investors, usually towards a specific security or asset. This sentiment can be segregated into a bullish or bearish mood in the market. As such, certain trading activity or price behavior will also impact market sentiment.For example, bullish sentiment indicates a growth in the price of securities, whereas a bearish sentiment sees falling prices. Many traders use broader market sentiment or sentiment data to help identify trends that may not seem apparent to many other investors.This can give way to investor sentiment indices or contrarian signals surrounding assets, which helps inform investors to make more educated decisions.Using Market Sentiment Market sentiment is not always grounded in fundamentals and for this reason is seen as inferior to other methods trading. This form of investing instead deals with emotion and feelings of traders.However, many traders, specifically shorter-term investors, will rely on market sentiment. Sentiment traders put a lot of merit into these trends, just as other investors look for specific signals or fundamental barometers to inform their decision making.This is due to the powerful impact of sentiment on short-term indicators or attitudes. Many investors also prefer taking contrarian views and positions, actively trading against an engrained market consensus.In this instance, if the broader market is buying a security, a contrarian investor would instead sell, and vice versa.This is a popular technique in the stock market, which can characterize stocks as either over or undervalued, based in large part by market sentiment.
Read this Term and positive seasonals in October as a reason to be optimistic. But if you told me that shares of Amazon and Meta would be blown up, I would never have predicted it would be one of the best months for equities in history.
Bespoke notes that at 13.6%, the current monthly gain in the Dow would be the 12th best in records dating back to 1915. With Monday’s trade still to come, the index needs to gain just another 0.8% to pas the best months in the 70s and 80s. That would take us back all the way to 1938.
Now for the bad news: As I’ve noted many times here, bear market rallies are often the most-powerful. The snap higher lately highlights that this is probably another bear market rally and with that, I’d be watching the technical levels closely. The S&P 500 stalled precisely at the 200-day moving average in the July-August bear-market
Bear Market
A bear market is defined as a financial market in which prices are falling or are expected to decline. This designation is most commonly used in the stock market, though can also be applied to other markets as well, including real estate, foreign exchange, commodities, etc.A bear market differs from periodic declines in assets by virtue of its duration, not frequency. For example, a bear market will typically see extended periods during which large numbers of stock share prices are falling over months, or possibly even years.Bear Markets ExplainedLike any asset, movements are driven by speculation and by extension levels of optimism in markets. In the case of bear markets, investor confidence is weak and a driver of assets in a downward direction. Of course, there are multiple factors at work with any sustained or directional push of asset prices. This influences speculation, psychological effects, and other external stimuli. Oftentimes, bear markets do not have a clear start or end point, nor do they use any specific metrics in their analysis or identification. Rather, the case of the stock market can help define a bear market. For example, if stock prices fall by 20%, typically after a rise of 20% and before a second 20% rise, then it can be surmised that a bear market is in effect.Moreover, bear markets are notoriously difficult to forecast, though there are also several different factors that exist that can help usher a bear market as well. Bear markets commonly take place when the economy is shrinking or during periods of weakness, turmoil, or uncertainty.This is supported by weak gross domestic product (GDP) readings and a sustained rise in unemployment or declines in corporate profits. Investor confidence is also a notable determinant, which tends to have a sustained fall during a bear market period.
A bear market is defined as a financial market in which prices are falling or are expected to decline. This designation is most commonly used in the stock market, though can also be applied to other markets as well, including real estate, foreign exchange, commodities, etc.A bear market differs from periodic declines in assets by virtue of its duration, not frequency. For example, a bear market will typically see extended periods during which large numbers of stock share prices are falling over months, or possibly even years.Bear Markets ExplainedLike any asset, movements are driven by speculation and by extension levels of optimism in markets. In the case of bear markets, investor confidence is weak and a driver of assets in a downward direction. Of course, there are multiple factors at work with any sustained or directional push of asset prices. This influences speculation, psychological effects, and other external stimuli. Oftentimes, bear markets do not have a clear start or end point, nor do they use any specific metrics in their analysis or identification. Rather, the case of the stock market can help define a bear market. For example, if stock prices fall by 20%, typically after a rise of 20% and before a second 20% rise, then it can be surmised that a bear market is in effect.Moreover, bear markets are notoriously difficult to forecast, though there are also several different factors that exist that can help usher a bear market as well. Bear markets commonly take place when the economy is shrinking or during periods of weakness, turmoil, or uncertainty.This is supported by weak gross domestic product (GDP) readings and a sustained rise in unemployment or declines in corporate profits. Investor confidence is also a notable determinant, which tends to have a sustained fall during a bear market period.
Read this Term rally so that’s a spot to watch.
What’s interesting, since we’re talking about the Dow here, is that it’s right at the 200-dma.