Sentiment towards precious metals is changing following the recent breakout above the $2,000 level for gold. Now is a great time to check out some of the most extreme sentiment traders looking 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 are built it can be a powerful sign that the retail crowd is 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 biases 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 – Going gold
According to the ActivTrader Market Sentiment tool we are seeing sentiment remaining bearish towards the Gold, which alludes to further price gains in the short-term.
The ActivTrader Market Sentiment tool shows that only 38 percent of traders are expecting more upside in gold right now. This is a steady increase in negative sentiment from the previous week.
It should be noted that sentiment is currently in the decline and retail is currently on the wrong side of the trade. Sentiment is very crucial for the price of the Gold as we typically look to fade extreme sentiment biases.
Silver – More upset
The ActivTrader market sentiment tool shows that 69 percent of traders are bullish towards the price of Silver right now as the shiny metals continues to move higher on the precious metals market.
The worsening bullish sentiment bias is good for continued price gains right now, as it certainly alludes to more upside trading eventually, however, it is important to state that silver price is starting to breakout technically.
I think we are about to see more gains in the silver in the near-term, however, the long-term trend change probably only happens above $28.00.
Copper – No skew
Market sentiment towards copper, which is not a good sign for bulls and bears in the short-term, as this means sideways trading ahead of the red metal.
The ActivTrader market sentiment tool showing that 51 percent of traders currently bullish towards the bellwether for market sentiment, copper. Sentiment was over 60 percent bullish at the start of the month.
I think it is worth noting that recent Chinese data has failed to ignite any type of sentiment skew towards the price of copper.