Market sentiment

Market sentiment, also known as investor attention, is the general prevailing attitude of investors as to anticipated price development in a market.^[1] This attitude is the accumulation of a variety of fundamental and technical factors, including price history, economic reports, seasonal factors, and national and world events. If investors expect upward price movement in the stock market, the sentiment is said to be bullish. On the contrary, if the market sentiment is bearish, most investors expect downward price movement. Market participants who maintain a static sentiment, regardless of market conditions, are described as permabulls and permabears respectively. Market sentiment is usually considered as a contrarian indicator: what most people expect is a good thing to bet against. Market sentiment is used because it is believed to be a good predictor of market moves, especially when it is more extreme.^[2] Very bearish sentiment is usually followed by the market going up more than normal, and vice versa.^[3] A bull market refers to a sustained period of either realized or expected price rises,^[4] whereas a bear market is used to describe when an index or stock has fallen 20% or more from a recent high for a sustained length of time.^[5]

Market sentiment is monitored with a variety of technical and statistical methods such as the number of advancing versus declining stocks and new highs versus new lows comparisons. A large share of the overall movement of an individual stock has been attributed to market sentiment.^[6] The stock market's demonstration of the situation is often described as all boats float or sink with the tide, in the popular Wall Street phrase "the trend is your friend". In the last decade, investors are also known to measure market sentiment through the use of news analytics, which include sentiment analysis on textual stories about companies and sectors.