1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Dr. Paul Price
Articles  | Author's Website |

Extreme Negative Sentiment in Nasdaq Stocks - Ready to Rumble?

When everyone is bearish: Think opportunity

I am not a huge fan of technical indicators, but certain metrics are certainly useful in seeing where we are on the continuum of sentiment. When extreme levels of optimism or pessimism are reached, it becomes much more likely to see a reversal rather than a move further away from normalcy.

Helene Meisler published a nice chart this morning illustrating how far the average stock in the Nasdaq composite has dropped. The number of new yearly highs divided by new yearly lows on that index now sits at the third lowest point since the start of 2012.

As of May 9, 2014 new Nasdaq highs were registering less than 30% of new 52-week lows. The most recent two times that happened previously led to multi-month rallies. The early February 2014, dip to a reading close to 50% saw a nice shorter term surge. Negative sentiment was not nearly as pervasive back then as it is today.

Ms. Meisler also noted that overall investment blogger sentiment had turned the most negative since 2013. That is a good contrary indicator which confirms the Nasdaq highs and lows signal.

The AAIA (American Association of Individual Investors) bullish sentiment and bearish sentiment readings last week showed more bears than bulls, a rare occurance.

Don’t buy simply because of these indicators.

If, however, you’ve been thinking of getting into a stock that’s been crushed, it may be time to buy before the mood changes. Rebounds tend to come without warning and those low prices, which you might have been hoping would decline even further, are often fleeting.

About the author:

Dr. Paul Price


Visit Dr. Paul Price's Website

Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/gurufocu/public_html/include/_config-rating.php on line 36

Rating: 5.0/5 (1 vote)

Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/gurufocu/public_html/include/_config-rating.php on line 36


Please leave your comment:

More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.

Performances of the stocks mentioned by Dr. Paul Price

User Generated Screeners

jrCannabis Companies
browntroutBV Compounders with Single Dig
browntroutSingle Digit TTM PE and Low BV
NeteaAdi growth screening
FingerStoppersEV/EBITDA gurufocus
HattcoSCapP>7PB1PE<40No OTC
browntroutSingle Digit TTM PE
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat