Sentiment Is Contrarian, Not So Reliable

Many brokers and market watchers find contrarian feedback in the views of ordinary people.


For example, as the market rose in the months after the follow-through in March 2009, many ordinary people were either convinced that the market was still doing terribly, or didn't trust the rebound.

Deeper in a bull market, people at social gatherings will fish for advice from brokers and market watchers. Later, they'll try to give advice.

And late in a bull market, you run into people who say they're thinking of quitting their day job and investing full time. When you hear that, the run is about done.

Legendary investor John Templeton described the cycle this way: "Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria."