Combine Contrarian Opinion with Other Technical Tools As a general rule, trade in the same direction as the trend of the consensus numbers until an extreme is reached, at which time the numbers should be monitored for a sign of a change in trend. It goes without saying that standard technical analytical tools can and should also be employed to help identify market turns at these critical times. The breaking of support or resistance levels, trendlines, or moving averages can be utilized to help confirm that the trend is in fact turning. Divergences on oscillator charts are especially useful when the Bullish Consensus numbers are overbought or oversold.

INVESTOR SENTIMENT READINGS Each weekend Barrons includes in its Market Laboratory section a set of numbers under the heading Investor Sentiment Readings. In that space, four different investor polls are included to gauge the degree of bullishness and bearishness in the stock market. The figures are given for the latest week and the period two and three weeks back for comparison purposes. Heres a random sample of what the latest weeks figures might look like. Remember that these numbers are contrary indicators. Too much bullishness is bad. Too much bearishness is good.

INVESTORS INTELLIGENCE NUMBERS Investors Intelligence (30 Church Street, New Rochelle, NY 10801) takes a weekly poll of investment advisors and produces three numbersthe percent of investment advisors that are bullish, those that are bearish, and those that are expecting a market correction. Bullish readings over 55% warn of too much optimism and are potentially negative for the market. Bullish readings below 35% reflect too much pessimism and are considered positive for the market. The correction figure represents advisers who are bullish but expecting short term weakness. Investors Intelligence also publishes figures each week that measure the

Those numbers can also be used in a contrary fashion. Readings above 70% suggest an overbought stock market. Readings below 30% suggest an oversold market. The 10 week readings are useful for measuring short to intermediate market turns. The 30 week numbers are more useful for measuring major market turns. The actual signal of a potential change in trend takes place when the numbers rise back above 30 or fall back below 70. The second smoothing produces 3 lines. Fast stochastics uses the first 2 lines. Slow stochastics uses the last 2 lines.