Yesterday, we witnessed a 2,5% drop on the DAX within the course of 5 minutes. There wasn’t a single news story that explained the sudden drop, so conspiracy theories and rumors naturally had to surface. Surely it was a “robot” that had run amok, or was it the immanent downgrade of Germany, or (non-existing?) rockets fired at Eliat in Israel… Read more

Tags corrective waves - derivatives trading - dominant trends - market psychology - robot crash - sentiment volatility

There are times when market psychology is particularly sensitive to new information. You may create an edge for yourself by identifying when this is likely to happen. There’s of course no such thing as a free lunch, however some of you may be familiar with three day lunches…
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Tags cognitive dissonance - confirmation bias - crowd psychology - dax certificates - derivatives trading - dominant trends - institutional trader - market psychology - three day lunch - trading strategy

Since last Wed. jump of more than 300 points, the DAX clearly shows weakness again this week and has dropped below 6000. A single news story is capable of producing large swings within minutes, making it a challenge to consider what the average market psychology is at any given time. Shaky market conditions aside, we’ll dare the following projection for the next few days… Read more

Tags bear rally - market psychology - sentiment average - sentiment volatility - shaky market condition

Recently, we’ve looked into a new trading concept called “Mind The Gap”. The strategy looks at how the sentiment develops towards the end of a the day. We then use this data to anticipate the opening gap for the following day. Although it is well know that (very) bad news publish after market close, our data show days ending on a positive note to be followed by a positive opening. Read more

Tags behavioral finance - bull bear psychology - crowd psychology - end of day sentiment - excessive investor pessimism - gap trading - market psychology - market reversal - market sentiment - sentiment volatility

Now that the politicians have decided that Greece is beyond saving, focus is quickly moving onto the next challenge, Italy. Yesterday, the country staged another bond auction, the treasury sold €3.9 billion for a yield of 5.6%, up 0,7% from the July 14th auction. More concerning than the rate increase however, was that the demand was notably down. As a result, the benchmark rate rose to 5,75%, approaching the levels from early August, when the ECB stepped in. Read more

Tags asset allocation - bull bear psychology - derivatives trading - excessive investor pessimism - italian bonds - market psychology - risk on risk off - sentiment momentum - system trading - trading strategy