Sentiment can be used as a powerful tool in trading and investing. Below you will see an example of how the media, more often than not speaks the language of the masses. As those who follow InTheMoneyStocks have learned, the general public unfortunately is often caught buying the tops, and selling the lows. Below you will see two pictures. One shows an actual article from Time magazine. The other shows a chart of Toll Brothers within this time frame.
The Time article shows a man hugging his home and discusses how and why everyone should be investing in the real estate market during this craze. Sentiment of such magnitude cannot be ignored. Once the media publicizes a topic focusing on a market trend, it is a clear signal the end of the road is near. With sentiment at such extreme levels the possibility of a top being in place was incredibly high!
The second picture you will see a chart of Toll Brothers. Note how shortly after this article was published Toll Brothers topped out.
This is where the housing bubble burst!