Sentiment towards a number of heavily traded market instruments is starting to show large one-way skews according to the ActivTrader platform Market Sentiment tool this week. The USDJPY, GER30, and Silver are all trending right now.
Sadly, traders are leaning against the prevailing trends in all three of these trading instruments right now. The ActivTrader platform Market sentiment tool is warning that ongoing trends in the USDJPY, GER30, and S&P500 could be about to accelerate.
Typically, Market sentiment readings for an instrument that have reached around 75 to 80 percent are considered to be at an extreme level, while market sentiment over 90 to 95 percent is often an indication that the trade could be peaking, and about to reverse at any time.
The USDJPY, GER30, and S&P500 are all in the danger zone right now and have sentiment skews over 80 percent in one direction. The ActivTrader platform Market Sentiment tool can be particularly useful for identifying continuations in established trends be spotting these historically high sentiment readings.
USDJPY- In Denial
According to the ActivTrader Market Sentiment tool some 81 percent of traders are currently bearish towards the USDJPY. This is interesting as the USDJPY pair have recently staged a major bullish trendline breakout and is in the midst of a powerful uptrend.
This bearish sentiment skew shows that traders are very much on the wrong side of the trend and continue to expect that the USDJPY pair will decline at any moment. It should be noted that retail traders typically have poor market timing and lean against established trends.
It is worrying that 81 percent of traders expect an imminent reversal and have been on the wrong side of this trade since the beginning. Watch out for the bullish trend to continue while sentiment remains this high.
S&P 500 – Extreme One-way Skew
The ActivTrades market sentiment tool shows that some 89 percent of traders are bearish towards the S&P 500 index right now. This is one of the largest one-way sentiment skews in the market right now and highlights that retail traders fail to believe the ongoing breakout above the 4,000 level.
It should be noted that the S&P 500 has been looking increasingly comfortable above the 4,000 level, and a number of price patterns are pointing to 4,200 and 4,500 as potential upcoming bullish targets.
The sentiment skew is starting to get extreme, which means the bullish trend in the index could speed up this week. Typically, we need to sentiment neutralize amongst the retail crowd, or reach a reading of 95 percent for the S&P 500 to reverse.
Silver – Bulls Beware
Market sentiment on the ActivTrader platform currently shows that 84 percent of traders are bullish towards silver right now, following last week’s strong technical bounce from the $23.75 support zone.
This is starting to become a large sentiment bias amongst the retail crowd, and we should be careful as the price of silver could start to falter from current levels, and reverse back towards the $23.75 level once again.
Silver traded below its 200-day moving average for the first-time since May 2020 last week. This means that traders are currently fighting against the short and medium-term trends, which are now bearish.
Watch out for more heavy losses in silver if the crowd continues to hold onto this extreme sentiment bias, and trades against the prevailing market trend.