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eternalfuture
How to measure market sentiment? The problem is that any measure would be very subjective.
Long-term fundamentals do influence market sentiment but I feel that is not the whole story. For the market sentiment to be derived solely from fundamental (or for that matter technical) it would assume that the "market" is rational and makes sound decisions based on those fundamentals. But I feel the "market" can be largely irrational for long periods of time in defiance to the underlying fundamentals.
Polls of market participants may shed some light on market sentiment but this would still be very subjective. Even though it is highly subjective the trader would likely have to take in as much of the information as possible (i.e. fundamental, technical, “market noise”) and "best guess" at what the prevailing market sentiment is. Anybody have a better method?
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