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Reason to Be Concerned About the Market

Posted by Larry Doyle on July 6, 2011 8:12 AM |

It is a well known fact that an increasing percentage of daily trading volume in the equity markets is driven by high frequency traders. Whether you think that is a good or bad development is currently irrelevant. It is a reality.

That reality has clearly changed the nature of investing and assessing the markets.

How does one invest with a long term horizon when so much of the market is driven by short term traders? Very carefully.

Long term investing requires a solid understanding of fundamental analysis. In the midst of that endeavor, though, investors might want to have an appreciation for technical analysis, which can be utilized across an array of time segments but is very often applied for shorter time periods.

Students of technical analysis will gain an appreciation for overbought and oversold conditions, along with a grasp of market psychology.

Have I lost you yet? I hope not. Let’s get a little more specific and look at an individual poll of active investors and why I think this poll may give investors reason to be concerned about current market levels.

Our Sense on Cents All-Star Laszlo Birinyi publishes a fabulous weekly poll at his site, Ticker Sense. As Laszlo highlights,

The Ticker Sense Blogger Sentiment Poll is a survey of the web’s most prominent investment bloggers, asking “What is your outlook on the S&P 500 for the next 30 days?” Conducted on a weekly basis, the poll is sent to participants each Thursday, and the results are released on Ticker Sense each Monday. The goal of this poll is to gain a consensus view on the market from the top investment bloggers — a community that continues to grow as a valued source of investment insight. © Copyright 2011 Ticker Sense Blogger Sentiment Poll

I would encourage readers interested in the markets to visit Laszlo’s site often. He is an All-Star for a reason.

Why do I think people may want to be a little cautious about the market? Let’s navigate further as Laszlo publishes his July 5th Blogger Sentiment Poll,


Why would I be concerned? When the level of bearishness is so low, it is the equivalent of everybody moving to one side of a boat. You know what happens then, right?

Market sentiment expressing such little bearishness can persist, but ultimately it corrects itself either in terms of price (that is a market retraction) or in terms of time (that is market runs in place).

Navigate accordingly….and make a point of visiting Laszlo in your ‘travels’.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.


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