Technical Analysis is the study of the behavior of the market and its participants.
So while identifying price trends is our ultimate goal, sentiment plays an important role in that process.
Prices don’t move up or down because of “fundamentals” or “the economy”. The price of assets move based on positioning.
When investors are all positioned one way, and are at a consensus, who’s left to drive prices further in that direction?
Last summer we saw some of the most pessimistic sentiment towards stocks in history.
Some of that sentiment has started to shift a bit, like in the AAII and II polls. We’re back somewhere towards the middle in those. You need, at least, some bulls to buy stocks to have a bull market.
But when it comes to Fund Managers, Cash is still their largest position, and they’re most bearish on equities. [Read more…]