Market Sentiment and flow of information

Crowd psychology plays an important role in the development of market tops and bottoms. Generally, a market bottom forms when the vast majority of traders are extremely pessimistic, and a market top occurs when the vast majority of traders are ultimately bullish. The fear of the unknown can be one of the biggest obstacles and challenges that we as traders can experience in our day to day trading.

How does crowd psychology work? All financial markets like the stock market convey the predominant opinion of traders about the future direction of their financial securities. Simply put, traders buy because they are optimistic, and they sell because they are pessimistic. By and large, if everyone was optimistic about the stock market, then the market wouldn’t function properly, because the market would be lopsided with buyers and there would be a significant lack of sellers.

The opposite happens at significant market bottoms. As a market bottoms, traders begin to believe that stocks will continue to fall and not likely to reverse anytime soon. Such a high degree of pessimism sets the stage for buying opportunities as traders wait for a sign that the worst is behind them.

Thus, many traders are confused about market sentiment. Here is a general guideline for you to consider the next time you look at a particular market with the thought of which direction is it likely to move.
Positive sentiment amid positive price action is natural, embrace it.
Negative sentiment amid positive price action is a contrarian's play, buy it
Negative sentiment amid negative price action is natural, let it be
Positive sentiment amid negative price action is a contrarian's play, sell it

There are many places to turn to get the general market information and the flow often falls into the following phrases-

News from internet example Briefing.com to TV , newspaper and finally magazines like Fobers. If we can convert information from the so call Phrase 1 source like internet news and Phrase 2 to check these news to see if they are belong to one of the companies listed in the S&P 500 index, then we have a very good chance that we can profit ahead of the crowd .We can go to the US gov't and agencies website to check the news whether any governement projects are awarded to private companies that are listed in the S&P 500 index so that we can prepare ourselves if we want to play this companies in advance before the full news is release to the media & make known to the public.