Market psychology and the DAX index
We have previously pointed out an astounding correlation between rising SentiTrade values and emerging DAX momentum. Today the SentiTrade indicator opened at 0,5. At 08.18 the sentiment quotient jumped to 0,6 and then 12 minutes later, at 08.30 to 0,65. From 8.45 to 10.30 we then see a sharp rise on the DAX index, from 7222 to 7282.
Back testing from 2005 to 2011 has shown a consistent pattern when the SentiTrade indicator opens with low sentiment values. A rapid advance in market sentiment within a short time span in early trading influence DAX index trading.
Our comparison of low vs. high sentiment values since 2005 shown an average sentiment value of 0,62. This number indicates that the overall ratio of positive vs. negative news stories and show an investor tendency to have a positive outlook on the market (and that financial publications write for this audience). SentiTrade interprets values below 0,58 to be in negative territory whereas values beyond 0,65 are positive.