Sentiment Indicators
Sentiment indicators monitor the activity of market participants such as floor traders, insiders, mutual fund managers, etc. The premise behind such indicators is that certain types of investors will have similar reactions to future market events as they have had to past events. These reactions may prove useful for identifying market turning points.
Insiders and New York Stock Exchange members have historically been “right.” They tend to be net buyers at market tops and net sellers at market bottoms.
Advisory services, on the other hand, tend to buy at the top and sell at the bottom. Tracking the sentiment of newsletter writers, for example, may prove to be a useful contrary indicator.
For more information, see all articles on: Behavioral Finance, Technical Analysis See also:
The Intelligent Investor: The Classic Text on Value Investing
Financial Statement Analysis: A Practitioner's Guide, 3rd Edition
Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)
