This column was originally published on RealMoney on July 13 at 9:50 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.I admit, I am fascinated by this sentiment discussion. If the market opened down every day and then closed higher each day, folks would be ecstatic. Every day they would come to work looking for stocks to buy. And if the people all around them were bullish, it wouldn't matter one bit. They would view that as part of the bull market, and wouldn't feel the need to be contrary. You surely wouldn't see a bunch of bulls trying to short every uptick or every move to a higher high. In fact, in that environment, if we had a few days when the market declined, they'd be telling us to buy the dip. And they surely would not go short for a decline of a few days. In that perfect world, we wouldn't hear comments like, "With all this bullishness, we must be setting up for a massive decline." Yet how many times recently have we come in to see the market start up and close down or open down, attempt to rally and close down anyway? I get the sense that market participants come in to work each day looking for shorts, or even a place where the Nasdaq 100 Unit Trust ( QQQQ) will bottom. Everyone seems terribly concerned that there is so much bearishness around them. People are discussing being contrary simply because they believe we must be setting up for a massive rally with all this doom and gloom. The same people who would not even consider going short for a three-day whack in a bull market are quick to buy the QQQQs for what might be a one- to three-day rally in this bear market.
Overbought/Oversold OscillatorsFor more explanation of these indicators, check out The Chartist's
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