market sentiment is the current attitude of investors overall regarding a company a sector or the financial market as a whole the mood of the market is affected by crowd psychology it is revealed through buying and selling activity 
in broad terms rising prices reveal bullish market sentiment while falling prices indicate bearish market sentiment understanding market sentimentmarket sentiment sometimes called investor sentiment does not correlate to fundamental changes in the market day traders and technical analysts rely on measurements of market sentiment since it influences the indicators used to measure and profit from short term price moves caused by the crowd psychology of active investors market sentiment is also important for contrarian investors who trade in the opposite direction of the prevailing consensus for example if everyone is buying a stock a contrarian would sell it in order to profit from the move upwards market sentiment is often described as either bearish or bullish when the mood is bearish prices are going down when it s bullish stock prices are going up emotion often drives the stock market so market sentiment is not related to the fundamental value of a stock changes in prices occur for many reasons beyond what a fundamental analysis would deduce market sentiment demonstrates broad concerns expectations and emotions about the market while fundamental value is about real business performance indicators of market sentimentmany investors profit by buying stocks that are wrongly valued due to market sentiment they use several indicators to measure market sentiment to help them determine the best stocks to trade including the cboe volatility index vix the high low index the bullish percent index bpi and moving averages the vix also known as the fear index is driven by option prices a crucial tool for traders the vix indicates the expected volatility of the s p 500 index high vix levels can signal heightened worries potentially a signal of a market bottom a low vix can suggest market complacency and is seen as a clue that a market may have peaked the high low index compares the number of stocks that have reached 52 week highs to the number of stocks that are at 52 week lows 