Over the last couple of days, we’ve compared the current SentiTrade’s values to those of the Lehman crisis in 2008. At the time of the Lehman collapse, our sentiment quotient (the ratio between positive and negative news items) had a value of 0,51 with a yearly average of 0,54. Read more

Tags behavioral finance indicator - bull bear psychology - crowd psychology - market reversal - market sentiment - market sentiment values - overreaction hypothesis - psychology trends - sentiment analysis - sentiment trigger point - sentiment volatility

The Elliott Wave Principle states that markets move in natural patterns according to changing investor psychology and price momentum. Specifically, crowd psychology will move from optimism to pessimism, and back up again, making it possible to forecast the progression of certain market trends. Elliot’s model states that the trends move in a total of 5 waves. In a bull market a dominant trends is found in wave 1, 3 and 5, whereas waves 2 and 4 will be corrective waves (see illustration below).
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Tags corrective waves - crowd psychology - dominant trends - investor psychology - market trends - pattern recognition - psychology trends