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Strategies & Market Trends : Waiting for the big Kahuna
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To: Investor2 who wrote (9577)11/12/1997 7:11:00 PM
From: Lazarus_Long  Read Replies (1) of 94695
 
<< Does anyone believe investor sentiment is a contrary indicator? >>
Yes and no. Anywhere from 1/3 to 2/3 of the way down in a bear market, a majority of people become pessimistic and expect further decline. So they sell. So they get the decline they expect.

So the fact that a large percentage of people are pessimistic does not mean a bear market is over.

Commonly, at the bottom of a bear market there is a spike of pessimism. People can't stand the words "stock market". They can't believe stocks will ever go up again. So they do.

If you can spot that spike of pessimism, you can get in near the bottom of the decline.
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