BEHAVIOURAL FINANCE - SECTION V - CHAPTER 36 - Market Sentiment & Technical Analysis

1. Module - 55
Market Sentiment &
Technical Analysis
CMT LEVEL - I

2. Market Sentiment
•Market sentiment refers to the overall attitude of
investors toward a particular security or financial
market.
•It is the feeling or tone of a market, or its crowd
psychology, as revealed through the activity and price
movement of the securities traded in that market.
•In broad terms, rising prices indicate bullish market
sentiment, while falling prices indicate bearish market
sentiment.

3. Market Sentiment
• Market sentiment is often presented as a characteristic of crowd
behavior.
• Humans behave under the influence of other humans and show
a tendency to conform to the crowd - even if the crowd is wrong.
• Crowds typically think and act differently than individuals act
when uninfluenced by others.
• In financial markets, this results in market participants not taking
objective trading decisions based on rational conclusions, but
rather emotional decisions based on feelings.

4. Indicators to Measure Market Sentiment
The VIX
The High-Low
Index
Bullish
Percent Index
Moving
Averages

5. Key Takeaway from Market Sentiment
•Market sentiment refers to the overall consensus
about a stock or the stock market as a whole.
•Market sentiment is bullish when prices are rising.
•Market sentiment is bearish when prices are falling
•Technical indicators can help investors measure Market
sentiment