User: MahnaMahna: analysis: The Slippery Slope Investment and Chuckle Forum: Why Sentiment Matters
The Slippery Slope Investment and Chuckle Forum: Why Sentiment Matters
Weekly sentiment.
The Wall Street Sentiment Survey* is unique in that the poll is taken on Friday after the market closes, and it asks participants for their forecast for the following week. This differs from other polls that take opinions through the week during periods when the market is active and changing.
Sentiment indicators are contrarian, so with that many bulls, there was a pretty good chance that prices would close down this week, which they did, thanks to Friday's selloff.
Another point worth noting is typical price behavior after a climax. Eighty percent bulls is a climactic reading, so we normally expect a short-term top to form within a few days. After a few days of consolidation, it is possible for the rally to continue, but this week's price top has set up an ascending wedge pattern, which has bearish implications -- the rising trend line will probably be violated.
Conclusion: Climaxes can initiate a move to higher prices or signal that a move has been exhausted. In this instance it appears that the latter is the case.
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Technical analysis is a windsock, not a crystal ball.
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