What is Sentiment Analysis

What is Market Sentiment Analysis?

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Market sentiment as previously stated is the pulse, feeling, and intentions of the big players for the future. Of course, small speculators are included, but what actually impacts the prices is the huge leverage of the big players. Many types of analyzing the markets through a sentiment approach exist:

  • Volume analysis through various technical indicators (a form of technical analysis as well).
  • Inflation expectations, which is the difference between TIPS and similar government bonds.
  • Commitments of Traders reports that show the positions of the funds and hedgers.
  • Put-call ratio analysis to infer the options traders’ expectations.
The CFTC is the governing body and has the objective of ensuring the viability of the futures and swap markets. It publishes the COT report weekly on Friday. This report outlines positions held by the mentioned parties on the close of each Tuesday, hence, a 3-day lag.
Being long an asset means to have a bullish position, therefore, buying in anticipation of a higher price.
Being short an asset means to have a bearish position, therefore, selling in anticipation of a lower price.

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