Bitcoin Sentiment Cycle Phase
Justin Mamis sums up nicely what the sentiment cycle represents in saying: “What we have is essentially a graphical representation of the manic depressive moods typically experienced by market participants as a function of time and price in one complete sentiment loop.”
> Returning confidence
By the time confidence is fully restored, the markets have been rallying for some time. They start to get choppy and retracement moves get consecutively more fierce, each one more intimidating than the last.
> "Buy the dip"
A huge pullback now gets underway, even larger than the scary one you may have witnessed last month or so. After such a dynamic bull run, investors are willing to take on a phenomenal amount of risk, and the smart money buys the big dip. Also, money is still flooding in from the general public, who likely read in The Sun that stock markets will remain strong for all eternity.
> Enthusiasm
At this stage, all economic data still supports the idea of higher prices. Traders who didn’t get involved in the last-dip buying opportunity now have hard evidence that it worked before. All of the traders who wanted to be long are now long (there are no more buyers), causing prices to decelerate. Distribution starts to take place, i.e. stocks transfer hands from smart money to stupid money—strong to weak.
> Disbelief / Overt Warning
Traders start to get that gut-wrenching feeling that something may be changing, but the fundamentals still don’t back this up, and people cling onto hope alone. Analysts start to get subtle warnings. Maybe previous market leaders start to break below important support levels or moving averages.
> Panic
Typically there’d be a catalyst here (i.e. big banks like Lehman Brothers start to file for bankruptcy… sound familiar?). The index will break below a previous reaction low or maybe the 200-day moving average. News readers will be telling the world that the fun is now over. Intelligent investors start to sell rallies, giving stock prices little or no chance of any recovery.
> Discouragement
Prices have been rattling off for some time now as the general public starts shedding stock and the short sellers are stronger than ever. There’s no good economic news flow and everyone thinks that stock markets will go down forever.
> Wall of Worry
Certain market sectors will now start to bottom out as everyone who wanted to sell has done so. The smart money now starts to move in slowly, resulting in the market pausing for breath or drifting along sideways for a few months. There are no sellers left; so despite the bad news flow, markets start to creep higher. Short sellers start to cover their positions, adding fuel to the fire.
> Aversion to Denial
Markets start to trend upwards. Short sellers start to get concerned that sentiment has changed. With no sellers above the market, these sorts of moves can be fast and sharp and tend to leave people behind.
Source:
"The Nature of Risk" by Justin Mamis
"A cycle begins with stocks climbing “a wall of worry” and ends when there is no worry anymore. Even after the rise tops out, investors continue to believe that they should buy the dips...
Unwillingness to believe in that change marks the first phase down: “It’s just another buying opportunity.”
The second, realistic, phase down is the passage from bullish to bearish sentiment...
Selling begins to make sense. It culminates with the third phase: investors, in disgust, dump right near the eventual low in the conviction that the bad news is never going to stop . . ."
Disclaimer:
Autor (Polmej) is not responsible for any damages and losses related to any products, services or ideas.
Autor (Polmej) encourages the audience to conduct their own investigations with due diligence on the company, product, service or idea.
Autor (Polmej) does not provide investment, financial or legal advice.
Justin Mamis sums up nicely what the sentiment cycle represents in saying: “What we have is essentially a graphical representation of the manic depressive moods typically experienced by market participants as a function of time and price in one complete sentiment loop.”
> Returning confidence
By the time confidence is fully restored, the markets have been rallying for some time. They start to get choppy and retracement moves get consecutively more fierce, each one more intimidating than the last.
> "Buy the dip"
A huge pullback now gets underway, even larger than the scary one you may have witnessed last month or so. After such a dynamic bull run, investors are willing to take on a phenomenal amount of risk, and the smart money buys the big dip. Also, money is still flooding in from the general public, who likely read in The Sun that stock markets will remain strong for all eternity.
> Enthusiasm
At this stage, all economic data still supports the idea of higher prices. Traders who didn’t get involved in the last-dip buying opportunity now have hard evidence that it worked before. All of the traders who wanted to be long are now long (there are no more buyers), causing prices to decelerate. Distribution starts to take place, i.e. stocks transfer hands from smart money to stupid money—strong to weak.
> Disbelief / Overt Warning
Traders start to get that gut-wrenching feeling that something may be changing, but the fundamentals still don’t back this up, and people cling onto hope alone. Analysts start to get subtle warnings. Maybe previous market leaders start to break below important support levels or moving averages.
> Panic
Typically there’d be a catalyst here (i.e. big banks like Lehman Brothers start to file for bankruptcy… sound familiar?). The index will break below a previous reaction low or maybe the 200-day moving average. News readers will be telling the world that the fun is now over. Intelligent investors start to sell rallies, giving stock prices little or no chance of any recovery.
> Discouragement
Prices have been rattling off for some time now as the general public starts shedding stock and the short sellers are stronger than ever. There’s no good economic news flow and everyone thinks that stock markets will go down forever.
> Wall of Worry
Certain market sectors will now start to bottom out as everyone who wanted to sell has done so. The smart money now starts to move in slowly, resulting in the market pausing for breath or drifting along sideways for a few months. There are no sellers left; so despite the bad news flow, markets start to creep higher. Short sellers start to cover their positions, adding fuel to the fire.
> Aversion to Denial
Markets start to trend upwards. Short sellers start to get concerned that sentiment has changed. With no sellers above the market, these sorts of moves can be fast and sharp and tend to leave people behind.
Source:
"The Nature of Risk" by Justin Mamis
"A cycle begins with stocks climbing “a wall of worry” and ends when there is no worry anymore. Even after the rise tops out, investors continue to believe that they should buy the dips...
Unwillingness to believe in that change marks the first phase down: “It’s just another buying opportunity.”
The second, realistic, phase down is the passage from bullish to bearish sentiment...
Selling begins to make sense. It culminates with the third phase: investors, in disgust, dump right near the eventual low in the conviction that the bad news is never going to stop . . ."
Disclaimer:
Autor (Polmej) is not responsible for any damages and losses related to any products, services or ideas.
Autor (Polmej) encourages the audience to conduct their own investigations with due diligence on the company, product, service or idea.
Autor (Polmej) does not provide investment, financial or legal advice.