Sentiment towards a number of metals is changing after the recent CPI and Retail Sales report from the United States. Now is a great time to check out some of the most extreme sentiment traders look for contrarian trading signals via sentiment readings.
Trading sentiment is most effective when retail traders are running counter trend, meaning that they are heavily leaning against established market trends and in increasingly large numbers. Additionally, once big sentiment skews build it can be a powerful sign that the retail crowd are being too one-sided.
Typically, market sentiment readings for an instrument that has reached around 75 to 80 percent is considered to be at an extreme level, while market sentiment readings over 80 to 95 percent is often a strong indication that the trade could be topping or about to reverse at any time.
I will now look at some of the strongest sentiment bias amongst the retail crowd right now. Some of the sentiment skews suggest that current price trends in FX, stocks, and precious metals are breaking point and big moves may be nearing.
GOLD – Slightly bullish
According to the ActivTrader Market Sentiment tool we are starting to see sentiment turning slightly bullish towards the yellow metal after this week’s data dumps, which alludes to price losses in the short-term.
The ActivTrader Market Sentiment tool shows that only 526percent of traders are expecting more upside in the yellow metal. This is a small bullish increase since the previous trading week.
It should be noted that sentiment is very crucial for the price of gold as we typically look to fade extreme sentiment biases for precious metals.
COPPER – Sell sentiment
The ActivTrader market sentiment tool shows that only 47 percent of traders are bullish towards the price of copper as it continues to be dragged lower by other precious metals.
The bearish sentiment bias is good for now, as it certainly alludes to more upside trading, however, it is important to state that the red-metal has also been effected by a falling in metals over recent week.
I think we are about to see more losses in the copper in the near-term, however, at some point when other metals head higher, so will copper.
SILVER – Still falling
Market sentiment towards the price of silver is dropping, which is a bad sign for bulls in the short-term, but good over the medium-term as this metric has moved substantially lower.
The ActivTrader market sentiment tool showing that 58 percent of traders currently bullish towards the widely traded metal. Sentiment was over 68 percent bullish at the start of the month.
I think it is worth noting that the more traders turn bullish or bearish then we should expect the opposite price effect to happen.