How can you tell when the crowd is over-optimist or over-pessimist?

[crgarcia]

How can you tell when the crowd is over-optimist or over-pessimist?

Any simple tests?

 

[Dr. Zhivodka]

Simple...read this board.

 

[ElCubano]

Quote from Dr. Zhivodka:

Simple...read this board.

then it'd be over -pessimistic 90% of the time...you know who Im referring to... Darth "cut and paste" Vader himself..

 

[academic]

Isn't it impossible to know whether people were over-optimist or over-pessimist until we see where the market actually goes, and what the fundamentals actually are?

I'm saying that I think we only know this with hindsight.

 

[academic]

Example: Our "indicator" tells us that the crowd is over-optimistic about stocks. Then the S&P rallies 10%. Were they really "over"-optimistic if they were right about the market direction?

 

[livermoreorless]

Quote from crgarcia:

How can you tell when the crowd is over-optimist or over-pessimist?

Any simple tests?

Stochatics

 

[rimshaker]

CNBC

 

[runningman]

Go to your local bank- ask to see the financial advisor. Ask him how many clients called him that month to redeem mutual funds. When this number is high, you buy. When his clients are calling to add to their investments, you sell. Pretty simple indicator.

 

[bellman]

Okay, ok, ok. For those with less imagination. What is the best quantifiable indicator for determining when the majority of people are optimistic or pessimistic?

An upward trending market indicates optimism is not the answer we are looking for.

Quote from academic:

Example: Our "indicator" tells us that the crowd is over-optimistic about stocks. Then the S&P rallies 10%. Were they really "over"-optimistic if they were right about the market direction?

 

[brownsfan019]

Quote from runningman:

Go to your local bank- ask to see the financial advisor. Ask him how many clients called him that month to redeem mutual funds. When this number is high, you buy. When his clients are calling to add to their investments, you sell. Pretty simple indicator.

That's pretty dead on. When I was a broker, no one wanted to invest when the market was down or flat. They only want to invest AFTER the market has moved substantially.

When you start hearing your neighbors talk about stock picks again (when was the last time Joe Schmoe had that 'can't miss pick'?), then you know something is up.