Sentiment

Avi Gilburt

"THE BEST in This Business" --PSK (ElliottWaveTrader)

Thinking More Deeply About What Drives The Market

For those of you that do not know me, my name is Avi Gilburt, and my job on FATrader.com is to make you think independently about the financial markets, with intellectual honesty being your guide.  

While there is an overabundance of market fallacies that are constantly propagated by analysts, pundits and investors alike, I intend on pushing you to challenge those commonly held fallacious theories in order to see the market as it is, rather than how most believe it to be.

Again, for those of you that do not know me, I view markets from a different perspective than most.  While most believe that the fundamentals are controlling within the market, I view the fundamentals as secondary to something I have learned to be controlling the market all the time:  market sentiment.

Have you ever wondered why markets rally on bad news or drop after good news?  

Or, better yet.  Have you ever seen where a market will rally one day due to a particular “influence,” whereas the next day, that exact same influence supposedly caused it to drop?   See these titles about inflation causing gold to both rise and fall within one day of each other.

Have you ever considered why?  

These are the type of questions I will always be posing to our readers.  I am going to make you think more deeply about what drives our market, as opposed to the very superficial perspectives you will read and hear from the public media outlets.

I have posted a number of articles outlining my perspective in more detail within the pages of FATrader.com.  Please feel free to read through them and ask me any questions you may have.

However, I want to add one qualification to my perspective of markets.  Whereas I believe market sentiment is the primary driver of markets that represent mass sentiment, it means that only larger markets are primarily driven by sentiment.  That also applies to stocks, but only to large capitalized stocks.  The further a stock is removed from mass capitalization, the more it will be influenced by the fundamentals of that stock.  

The best example I can point towards is the difference between a biotech company like Bristol Myers, which is predominantly driven by mass sentiment, and a smaller micro-cap biotech company, which is predominantly driven by the fundamentals of their particular drugs.  For example, a report regarding a single drug will not cause a massive move in the stock of BMY unless it coincides with the mass sentiment pattern inherent in the stock, whereas news regarding the drug of a micro-cap biotech company will certainly move that stock.

Therefore, while my general perspective is that market sentiment drives markets and stocks that trade on large enough volume to exhibit the sentiment of the general masses, as we look to smaller and smaller stocks and markets, fundamentals will play a larger role.  Ultimately, I think all investors have to understand where the overall markets reside when it comes to mass sentiment in order to better understand the larger trend.

Avi Gilburt, co-founder of FATRADER, is the lead moderator of the forum and covers Market Sentiment. Founder of ElliottWaveTrader, with over 4000 members, Avi is renowned for being one of the most accurate and widely read analysts on the Web.
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