Wednesday, 11 October 2017 10:30

Why Sentiment is Not a Stock Indicator

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(New York)

The whole market is worried about a share collapse. Markets have been rising inexorably, and there seems to be fear that a sense of euphoria prevails amongst investors. The market appears to be overbought on the back of positive sentiment. While the prevailing wisdom is that overbought and euphoric markets tend to perform very poorly, the fact is, an overbought market in itself is not a reason to sell. The market can often keep rising for some time, and produce significant gains before it finally reverses, such as the Nasdaq in 1999-2000.

FINSUM: The market looks very vulnerable at the moment, but that does not mean it won’t keep rising. Investors need to be willing to miss out on gains if they intend to cash out now.

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