Jake Bernstein's SF Bay Area Traders and Investors Group Message Board › Tomorrow - The Hedge Funds Secret Weapon
Santa Cruz, CA
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Jake Bernstein presents…
Using Small Trader Sentiment to Spot Market Tops and Bottoms
The Hedge Funds “Secret Weapon” WEBINAR
3 JANUARY 2014
3:30- 5:30 PM PST
In 1987 I initiated the Daily Sentiment Index (DSI). Since then the DSI has become a darling indicator of the biggest and best hedge fund traders in the world. My list of DSI clients reads like a who’s who of famous traders, major brokerage houses, market research firms and banks. But why? The answer is simple:
Small trader sentiment if used properly can provide proprietary traders with a significant timing edge AHEAD of market turns. And getting the edge is often critical in generating profits.
Contrary Opinion Theory
Traders who follow the teachings of contrary opinion theory believe that the majority is often wrong. They further believe extremely high levels of bullish sentiment tend to LEAD or are closely correlated with TOPS and very negative sentiment tends to LEAD market bottoms. My research confirms these tendencies but the relationships are NOT ONE TO ONE. In other words, very negative sentiment and very positive sentiment are NOT ALWAYS RIGHT!
Sentiment must be used correctly if it is going to lead to profits! But how?
Consider the weekly crude oil futures chart below. The top part of the chart shows daily price bars and the bottom shows my DSI small trader contrary opinion sentiment indicator converted to a weekly reading. Note the relationship between very bearish small trader sentiment and bottoms in price. Note how very low sentiment correlates with market lows. But as you can also see, the small trader is NOT ALWAYS WRONG! I find the value of sentiment as an indicator to be fantastic but HOW DO WE USE IT?
My 5 BEST Ways to Use the Daily Sentiment Index
Traders who follow the teachings of contrary opinion are very well acquainted with its ability to spot important market turns. However, they also know that strong sentiment is not always correct. The task and the dilemma are to find ways in which market sentiment can be used with timing in order to pinpoint market turns more accurately. I believe that top hedge fund traders have figured out ways in which my DSI can help them spot these turns. While I cannot guarantee you that I know the secrets of these top traders I believe I have developed five important ways in which small trader sentiment can help you become a better trader. I will teach these five applications at my forthcoming webinar as announced above.
This is not a system trading webinar...but a market timing webinar!
What’s the difference? Why do I differentiate between these two approaches? The answer is simple: I do not use the DSI as part of a trading system with specific entry and exit rules. I use the DSI as a set up to help spot market turns which are then timed with several indicators and procedures. Notwithstanding the limitations of this approach, I believe that there is considerable value in knowing and using small trader sentiment the right way. This is what my webinar is designed to show you. In total I will teach five different applications and I will show numerous examples of how to implement these applications. I believe you will find my work unique, precise, and extremely helpful in spotting turns.
The complete database history - included at no charge
We have been keeping small sentiment statistics daily since 1987! I believe we have the longest and most continuous historical database of small trader sentiment available anywhere. As part of this webinar I will provide you with the complete historical database on all active US markets and you also get a free three month subscription to the daily sentiment index for either your Genesis Trade Navigator Program or the raw data you can import into your own charting program. This way you can determine without additional cost whether DSI can be helpful to you. In any event what I will teach you can be applied equally to virtually any numerical data series based on sentiment.
Take a look at this!
There are a number of different ways in which market sentiment, as measured by the DSI, can be used to evaluate and/or trade the markets. Shown below is a chart of one application that I will teach of my webinar. The bottom of the chart shows my DSI sentiment timing oscillator which can help pinpoint market turns very close to the start of new short-term trends.
NO…it’s not perfect but it can be a great addition to your arsenal of timing tools.
And there are other ways in which small trader sentiment can help your timing.
Here is what I will be teaching
My theory of contrary opinion and market sentiment
The reality of how markets sentiment works
When sentiment is important and when it’s not important
The psychology and behaviorism of crowds
Market behavior at major tops and bottoms
Using market sentiment to forecast short-term direction
Using market sentiment as a short-term timing indicator
Five different applications of market sentiment
Using market sentiment as an intermediate term indicator
How to use market sentiment as one part of your trading strategy
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See you at the webinar!