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Forex (Video): Fear in the Markets? Expect a Trend Change
Sentiment extremes can give you important clues about market direction.
Think back to last fall. Stocks around the world were falling like a rock, but the U.S. dollar, to most people's surprise, was rallying against the euro -- on fear, said market commentators; fear and hope that when everything else crumbles, the dollar would still stand. But do you remember what happened after everyone and their brother had shifted into the dollar? That's right -- it fell hard. Ironically, a sentiment extreme in favor of the dollar marked a huge top for the currency.
Fast forward to today. The U.S. dollar has just put in a new low for the year. Now the same commentators say that the dollar is falling because of "increasing risk appetite" for other assets. We are finding ourselves in a similar environment -- but in reverse: Today, people shun the USD. Could it mark a dollar bottom and a start of the rally?
Before you answer this, watch this free classic video that editor of EWI's intensive Currency Specialty Service Jim Martens recorded for his subscribers on October 24 of last year, right before the USD began falling. There is a very important lesson in this free video.