Sentiment means different things to different people. The typical use of sentiment is as a contrarian indicator. There are some long-standing measures of investor sentiment like those from AAII and Investor’s Intelligence. With the explosion of the social web others are being devised to harness the collective intelligence of investors from various sources. However making the leap from an extreme sentiment measure to trade is more difficult than it appears on the surface. Most traders realize that trends can last longer than anyone expects and that sentiment can remain extreme for long periods as well. In short, sentiment like any indicator requires a more nuanced approach. In today’s screencast we examine a few recent posts that help illustrate the use of sentiment.
Posts mentioned in the above screencast:
Individual investor sentiment is getting a tad too bullish. (Pragmatic Capitalism)
“There is a big difference between discovering a method to measure close to real time collective sentiment and its relationship to market behavior and exploiting it for market gains.” (Phil Pearlman)