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Early Thoughts on Sentiment

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While going through my morning routine and chatting with a number of friends and clients about the current environment, the topic came up that too many people are looking at the same overbought indicators and expecting a decline. Then someone mentioned that until everyone is bullish, the market can't roll over.

This argument makes a lot of sense, which got me thinking: What if everyone is in and we only hear about the folks who are negative because the increased print, radio and TV media coverage of the market focuses on the countertrend view for debating purposes? I don't know if this is the case, but one thing I do know is that if it weren't for the constant need for guests giving their view, how would anyone know what the sentiment was?

I don't know if this makes any sense, but I do know that the increased focus in the financial press is very different than in prior market cycles. Remember that there was no non-stop television coverage of the market before the mid- to late-1990s. You couldn't just turn on the TV or radio and hear someone talk about the level of the various technical indicators including stochastics and MACDs. Back then, there was no Minyanville.com educating and informing each day.

One thing is for sure, no matter how strong the environment, the media will find bears to interview and no matter how weak the market is, they will find bulls to speak to. If you are waiting for the last bull or bear at any given time, stop waiting because human nature proves it won't happen.

We will only know how this dynamic has changed the market and its indicators well after the fact, but it is something to be very aware of when looking at the current environment relative to market history.

No positions in stocks mentioned.
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