Sentiment towards precious metals is increasingly interesting as they start to break above their respective 200-day moving averages. Now is a great time to check out some of the most extreme sentiment traders who look for contrarian trading signals via sentiment readings.
The 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 build 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 are considered to be at an extreme level, while market sentiment readings over 80 to 95 percent are often a strong indication that the trade could be topping or about to reverse at any time.
I will now look at the strongest sentiment bias amongst the retail crowd right now. Some of the sentiment skews suggest that current price trends in FX, stocks, and precious metals are breaking points and big moves may be nearing.
Copper – Quite high
According to the ActivTrader Market Sentiment tool, a large majority of traders are still bearish towards the price of copper as it continues to move towards the 400.00 level.
The ActivTrader Market Sentiment tool shows that only 31 percent of traders are expecting more upside in the red metal. A minor decrease has been seen since the previous trading week.
It should be noted that sentiment is very crucial for copper as we typically look to fade extreme sentiment biases in the precious metals space.
Silver – Slight decline
The ActivTrader market sentiment tool shows that some 75 percent of traders are bullish towards silver as it continues to race higher towards the $24.00 level.
The sentiment bias certainly alludes to more upside trading, however, it is important to state that bullish sentiment has dropped by around 4 percent since last week.
I think we are about to see more gains in the silver as traders are finally starting to turn more bearish after being euphorically bullish for some time.
Gold – Rally time
Market sentiment towards the gold is getting less bearish, which is a bad sign for bulls as one-sided sentiment skews tends to mean the opposite in terms of what traders are expecting.
The ActivTrader market sentiment tool showing that only 53 percent of traders currently bullish towards the yellow metal. A decrease of 9 percent since last week.
I think it is worth noting that the more traders turn bearish then the upside should start to pick-up, and especially with the metal trading above its 200-day moving average.
