>>>What empirical evidence exists, if any, that the large speculators, such as those in Titan, are always wrong.>>>
gcoman, one such evidence of contrarian investing is the success of the dogs of the dow, however other than that u can overlay a put/call chart (or a rydex chart) on the spx and the tops aline with low p/c ratios and the bottoms aline with high put/call ratios.
good article on contrarian thinking, the crowd is ALWAYS wrong at the turning points, in between using contrarian analysis is a lot more subjective, also measuring sentiment is subjective and standards of overbought and oversold can change during different market conditions, i think what JT is seeing here, as has been the case during most of the decline from sept top is the lack of buying in bearish funds, speculators have been trading mostly against the trend all the way down, what you want for the trend to end in a climax is everybody, i.e. "the crowd" to join the bandwagon and buy into the trend. At bottoms u want everybody bearish and bullz are hard to find at tops u want everybody bullish and bears hard to find.
there were a few lonely bears on sept 1st -g-, we should expect a few lonely bullz at the bottom, that means most should be heavily invested in short fund in rydex and they gave up buying the dip, at the bottom, especially the leveraged funds.
now p/c ratios have endorsed the downtrend much more than rydex, so the sentiment indicators remain a little mixed.
syharding.com
In other words, as an upside rally gets underway and investors pile in, their profits
begin to pile up, and they become increasingly more excited and optimistic. So it's
not surprising, in fact could be no other way, that by the time the rally reaches a
top, investor enthusiasm and bullishness will also have reached an extreme, and
they will find it hard to recognize that the inevitable turning point has been
reached. In the other direction, when a correction gets underway, if it becomes
serious, investors will become increasingly fearful and bearish as prices continue to
fall. So by the time the correction ends, investor fear and bearishness will have
reached an extreme, making it difficult to recognize the buying opportunity. |
