Market sentiment

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Market sentiment is the general prevailing attitude of investors as to anticipated price development in a market.[1] This attitude is the accumulation of a variety of fundamental and technical factors, including price history, economic reports, seasonal factors, and national and world events.

For example, if investors expect upward price movement in the stock market, the sentiment is said to be bullish. On the contrary, if the market sentiment is bearish, most investors expect downward price movement. Market sentiment is usually considered as a contrarian indicator: what most people expect is a good thing to bet against.

Market sentiment is monitored with a variety of technical and statistical methods such as the number of advancing versus declining stocks and new highs versus new lows comparisons. A large share of overall movement of an individual stock has been attributed to market sentiment[2] The stock market's demonstration of the situation is often described as all boats float or sink with the tide, in the popular Wall Street phrase "the trend is your friend".

Bear and Bull, Reinhard Dachlauer, Frankfurt

Market sentiment, as such, might be acquired from more than one sentiment analytical tool. For example there could be just simple extraction of movement on stock exchange and validly called market sentiment. Another tool is to extract the news and media information based on their polarity. Yet another sub-subject might be community sentiment about the market movements (blogs, forums).

In the last decade, investors are also known to measure market sentiment through the use of news analytics, which include sentiment analysis on textual stories about companies and sectors.

See also[edit]

References[edit]

  1. ^ "Market Sentiment Definition". Investopedia. 
  2. ^ Thomas Dorsey, Point and Figure Charting, Sentiment has a "66% influence on the overall movement of an individual stock"

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