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Technical Analysis Explained, Fifth Edition: The Successful Investor's Guide to Spotting Investment Trends and Turning Points, 5th Edition by Martin J. Pring

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29 THE IMPORTANCE OF SENTIMENT

I find more and more that it is well to be on the right side of the minority since it is always the more intelligent.

—Goethe

During primary bull and bear markets, the psychology of all investors moves from pessimism and fear to hope, overconfidence, and greed. For the majority, the feeling of confidence is built up over a period of rising prices so that optimism reaches its peak around the same point that the market is also reaching its high. Conversely, the majority is most pessimistic at market bottoms, which is precisely the point when it should be buying. These observations are as valid for intermediate-term peaks and troughs as they are for primary ones. The difference is normally of degree. At an intermediate-term ...

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