Here's one good reason why: a historic market sentiment extreme
By Elliott Wave International
The DJIA, S&P and NASDAQ are struggling to bounce. Yet the bullish convictions remain high. Says a February 5 Investor's Business Daily headline:
"Why Mutual Fund Investors Need Not Panic After January Sell-Off"
When is the best time to get out of the stock market? When everyone else is invested and extremely optimistic. When is the best time to buy, then? Exactly: when you see the opposite sentiment.
Market sentiment is one indicator you don't hear much about on financial networks. Yet we've seen sentiment extremes repeat at every recent market top and bottom. What's more, as Robert Prechter, the president of Elliott Wave International, puts it, "the greater the degree of the advance that is ending, the greater the optimism at its peak."
This contrarian view of the market can be a financial lifesaver.
Below is an excerpt from Prechter's recent Elliott Wave Theorist, a monthly newsletter he has published since 1978. It shows you one way how Bob finds bearish and bullish extremes in the market. [Read more...]