The Gilmo Report

September 18, 2022

September 17, 2022 10:19 pm ET

A one-day pause on Wednesday following Tuesday’s brutal post-CPI sell-off looked like it might last at least a little bit longer as market pundits and talking heads anticipated an imminent crash. What the crowd is absolutely certain is about to happen generally doesn’t happen right away, if at all. However, I don’t necessarily get carried away with this since at certain points in an extended bear market the concept of sentiment as a contrarian indicator becomes moot, in my view.

Ultimately, it is all about money flows. Sentiment is just one coincident indicator out of many, and when we live in a world where the market watches itself so closely, sentiment can sometimes evolve into a double-contrarian indicator. If everyone knows that everyone has become bearish in real-time, then a double-contrarian effect can occur where everyone simply becomes bullish because everyone is bearish, which in turn is bearish. Wrap your head around that one.

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