Why the Herd Cannot Buy Low or Sell High
The June Socionomist reveals why the "wisdom" of crowds does not apply to investing
By Nico Isaac
7/27/2011 5:30:00 PM
In 1907, an Englishman at a county fair observed that a group of independent opinions offers a better estimate than can any single individual in the group. Fast forward one century, and this idea grew into the theme of a popular book with a really long title: "The Wisdom of Crowds: Why the Many are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations."
Filed Under: Robert Prechter, Daily Sentiment Index (DSI), herding, Robert Prechter, socionomics, wisdom of crowds
Category: Socionomics
By Vadim Pokhlebkin
5/9/2011 4:00:00 PM
Since the May 4 top near $1.4950, the EUR/USD (the euro-dollar exchange rate and the most actively-traded forex pair) has lost an incredible 700 points ("pips" in forex lingo). That's a 7-cent gain by the U.S. dollar against the euro -- in just 4 trading days. You'll find many explanations for this dramatic reversal in the mainstream financial press. But here's one that's not often discussed...
Filed Under: Daily Sentiment Index (DSI), Elliott wave, euro, eurozone, euro/USD exchange rate, forex trading, market forecasts, sentiment, short selling, U.S. dollar, volatility
Category: Currencies
What's Behind The Recent Bond Market Rally?
You didn't have to wait for "unrest in Libya" to anticipate U.S. Treasury bonds' falling yields and rising prices.
By Nico Isaac
2/28/2011 4:45:00 PM
Starting in early February, the long-dated securities sector was undergoing its longest slump since 2008. The 10-year Treasury note yield had soared 130 basis points from its October trough to hit a nine-and-a-half month high, while prices (which move opposite yields) were in losing streak central. And, according to the usual suspects, the big "fundamental" arrow in bond prices would continue to point DOWN.
Filed Under: Daily Sentiment Index (DSI), fundamental analysis, Treasury bonds, U.S. Treasuries
Category: Interest Rates
By Bob Stokes
1/31/2011 5:15:00 PM
Despite the importance of technical analysis, the majority of traders rely at least in part on a fundamental strategy. With this in mind, two recent junctures in the U.S. Dollar Index clearly show how that approach has failed...
Filed Under: Daily Sentiment Index (DSI), Elliott Wave trading, euro/USD exchange rate, eurozone, Fibonacci, forex trading, fundamental analysis, sentiment, technical analysis, Traders, U.S. dollar
Category: Currencies
By Bob Stokes
1/14/2011 6:00:00 PM
But when you gain a surprising new insight on a subject you thought you knew well, that may prompt a complete re-assessment...learning the facts about extreme sentiment measures may prompt you to re-assess market action...
Filed Under: Daily Sentiment Index (DSI), Dow Jones Industrial Average (DJIA), market forecasts, Nasdaq Composite, sentiment
Category: Stocks
By Nico Isaac
1/3/2011 5:15:00 PM
In the afternoon hours of December 31, 2010, one 900-pound bull headed for slaughter in the back of a stock trailer busted free while its driver waited at a red light. Believe it or not, it was the 14th bull that same day to attempt escape in the New England area, with 13 other bulls breaking out of their stables at a nearby ranch. It's a fitting metaphor for what's happening in the world of finance. There, the raging bulls have shattered their restraints and are running wild on Wall Street
Filed Under: bull market, Daily Sentiment Index (DSI), Dow Jones Industrial Average (DJIA), investor psychology
Category: Stocks
By Bob Stokes
4/15/2010 11:15:00 AM
People are feeling better about the economy; stock traders are showing optimism; corporate upper management is confident, too. At Elliott Wave International, we've been observing market behavior for over 30 years. Be warned: We've seen such optimism before, and we can tell you now what it likely means for stocks.
Filed Under: VIX, Daily Sentiment Index (DSI)
Category: Stocks
By Vadim Pokhlebkin
8/20/2009 3:30:00 PM
The DJIA has been moving sideways for most of August, but the talk of "a new bull market" is getting louder. The optimism is back! If you randomly poll 100 average investors and ask them whether it's bullish or bearish for stocks, 99 of them will probably answer "bullish." What would your answer be?
Filed Under: Robert Prechter, Daily Sentiment Index (DSI), U.S. Federal Reserve (the Fed)
Category: Stocks
By Neil Beers
8/13/2009 12:00:00 PM
In his August 2009 Theorist, Bob Prechter explains what "the prudent thing to do" in the markets is, based on Elliott wave patterns and sentiment indicators -- plus the Dow's 3/8 Fibonacci retracement from the March 9 low.
Filed Under: Daily Sentiment Index (DSI), Fibonacci, Fibonacci, Robert Prechter
Category: Stocks
By Vadim Pokhlebkin
6/5/2009 5:00:00 PM
The U.S. dollar, beaten badly since late April, took the upper hand on June 5 and broke below a psychologically important price point of $1.40 against its main competitor, the euro. But whatever you read in the financial press regarding the "reasons" for the dollar strength, they all pale in comparison with this one: market sentiment. take a look at this chart to understand why.
Filed Under: U.S. dollar, euro, sentiment, Daily Sentiment Index (DSI)
Category: Currencies
By Vadim Pokhlebkin
4/1/2009 10:45:00 AM
Vadim Pokhlebkin: Jeffrey, the latest reports show that commodities are “headed for a third quarterly drop, the longest losing streak since 2001, as demand for raw materials from crude oil to nickel shrank..." Analysts clearly blame price declines on the drop in demand. You are a technical market analyst, but do you pay attention to the supply and demand balance? -- Jeffrey Kennedy: A short answer is yes, but let me explain...
Filed Under: coffee futures, soybean futures, Daily Sentiment Index (DSI), Fibonacci
Category: Commodities
By Vadim Pokhlebkin
7/22/2008 5:30:00 PM
The Daily Sentiment Index is a contrarian indicator, and it can be a very useful tool when you're trying to time a market top or bottom. Watch Tom Denham, EWI's Senior European Equity Analyst, explain how he successfully used to forecast a recent rally in Germany's DAX, Europe's benchmark stock index.
Filed Under: DAX, Daily Sentiment Index (DSI)
Category: European Markets
By Vadim Pokhlebkin
7/8/2008 5:30:00 PM
Investor sentiment in Europe happens to be mediocre right now. The Daily Sentiment Index – where readings below 20 indicate an extremely bearish sentiment and those above 80 indicate extreme bullishness – is not exactly scraping the bottom, but it has seen better times. Watch this free video to learn how to use sentiment indicators to your advantage.
Filed Under: Daily Sentiment Index (DSI), DAX
Category: European Markets
Sugar Futures: Market Sentiment Is Key
Elliott Wave International discusses the current sentiment reading in Sugar futures and its implications for the trend.
By Vadim Pokhlebkin
3/12/2008 5:30:00 PM
Sentiment is the filter through which traders evaluate everything they know and think about a market. Optimistic traders easily accept bad news and focus on the positives. Pessimistic traders dismiss past successes and focus on fears instead. It's a timely observation, too – because sentiment in Sugar futures happens to be pretty optimistic right now.
Filed Under: sugar futures, futures trading, Daily Sentiment Index (DSI)
Category: Commodities
Futures: Market Sentiment Near Extreme
Elliott Wave International discusses daily sentiment readins as they apply to commodity futures markets.
By Vadim Pokhlebkin
12/12/2007 12:30:00 PM
Market sentiment is a curious thing. A measure of investors' bias towards a particular trend, if you plot it on a chart, you will see that it shifts from extreme optimism to extreme pessimism and back again. And each extreme in sentiment usually coincides with a similar extreme in price. Look at this chart of one particular meat commodity market, for example.
Filed Under: futures trading, Daily Sentiment Index (DSI)
Category: Commodities