A detailed review of Sentiment reveals that the majority is still pessimistic towards stocks (see ssentiment concentration). Pessimism towards stocks favors base building, maybe a false breakdown that incorrectly convinces the majority a crash is unfolding, but not a crash from historic highs. This point, while boring in comparison to the hype of doom and gloom, is important! History's major market crashes were generally preceded intense optimism towards stocks. Intense optimism eagerly embraces theories advocating a permanently high plateau for stocks (see Irvine Fisher). After that a real crash leaves the majority as bagholders of another trend transition.
Headline: NASSIM TALEB: The markets will crash again and a lot of people will get hurt
Nassim Taleb, the man who popularized the “black swan” theory, recently did a Q&A with Yahoo Finance.
Taleb, the author of “The Black Swan” and “Antifragile,” is the “Distinguished Scientific Advisor” to Universa Investments, a hedge fund founded by Mark Spitznagel in January 2007 that specializes in convex tail hedging and investing.
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