Market Sentiment
What It Is:
Market sentiment is the general feeling about the climate of the market as expressed by the direction of market prices.
How It Works/Example:
Market sentiment, as the name suggests, describes the outlook of investors in a market. Market sentiment is most evident in overall price trends. For example, rising prices suggests an optimistic (bullish) market sentiment, and falling prices suggests a poor (bearish) market sentiment.
Why It Matters:
The nature of market psychology suggests that any given trend may be more indicative of market sentiment than of fundamental gains or losses in the value of stocks.
As a result, market prices are not necessarily indicative of a stock's fundamental value.
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Cached on May 24, 2012, 8:36 am