When everyone gets really bearish, all you need to do is watch for a day where there is some sort of panic selling to clean it out. After that, there will be trepidation and fear, and when it won't go down anymore on even more bad news, the bottom is in. Justin Mamis has a great little sentiment cycle in his excellent book, The Nature of Risk, but it seems to be now out of print. Mamis had an interesting saying, as a retort to the brokers at his firm who scorned his technical analysis but asked for his opinion anyway:
Broker John Doe (in a panic during a sell off) - "Justin, has XYZ made a bottom yet?"
Justin (without even looking up from his charts) - "Not if you're still asking."
And as for my statements, this is exactly why I made my site in the first place. Many a good cocktail party has been ruined for me after people cornered me to ask about what I thought of the market, knowing that I'm a professional trader. Well, they should just do their own homework and not rely on other people's opinions - particularly when they become violent that someone (who they solicited the opinion from in the first place) tells them something contrary to what they want to hear. In my experience, when people ask for an "opinion", what they really want to hear is agreement with their position.
My policy now is to say "I don't know" when people ask me anything about the market. I resort to saying that they should just make sure that they have adequate risk and money management controls in place and leave it at that. I mean, even the best traders in the world are probably no better than .500 batters, so this means that risk and money management is everything. The most important thing is not to take huge hits and live to fight another day.
I am not sure how spammers can play on the sentiments of small investors. My impression is that people never intend to sell, so they should just stop looking at the screen and cease torturing themselves with every wiggle and squiggle of the chart. If they Believers, they should act like Believers - but they don't have to try to convince everybody else or put them down for not agreeing. As a trader would say at my old firm, "They have to buy their way out!" |
