Sentiment in the Forex Market: Indicators and Strategies to Profit from Crowd Behavior and Market Extremes

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c03 JWBK195-Saettele June 5, 2008 18:56 Printer: Yet to come

32 SENTIMENT IN THE FOREX MARKET

THE DEATH OF EQUITIES—AUGUST 13,

1979

One of the most famous “magazine cover indicator” examples is the August

13, 1979, issue of Business Week. The cover story was titled “The Death

of Equities.” Crashed paper airplanes, made from stock certificates, were

pictured on the cover. The gist of the article was that little hope existed for

stocks. Inflation was rampant, and it was assumed that this would remain

the case. For this reason, gold and even diamonds were being touted as

much better investments than stocks. In fact, the Labor Department had

just passed a law allowing pension funds to invest in asset classes other

than the stock and bond markets, among them hard assets such as gold. Of

course, gold topped out at $873 in January 1980 and just recently reached

that level again—over 27 years later. An excerpt from the article describes

the mood of the day regarding the U.S. stock market.

Even if the economic climate could be made right again f or equity

investment, it would take another massive promotional campaign

to bring people back into the market. Yet the range of investment

opportunities is so much wider now than in the 1950s that it is

unlikely that the experience of two decades ago, when the number

of equity investors increased by 250% in 15 years, could be repeated. ...