Sentiment and Price action (Technical analysis notes) While attempting to analyze a market the reliability of the approach to predicting its future can be estimated by looking not just at past results but at the waves or impulses that generally characterize its movements. Several different patterns of behavior could be noted, and utilized in trading that particular contract or market or individual security. Some may not be able to be viewed as smooth or predictable from smaller time frames and may appear completely chaotic. When attempting to use simple technical analysis to trade these time frames a whipsaw or choppy effect is noted and interferes with prediction on that level. It may still however be useful to look at the smallest time frame practical to get a trade entry which is optimum. Waiting for a longer time frame signal of a top for instance may result in an entry removed from the change in momentum. So an optimum indicator of sentiment is tuned in to fast momentum changes and also looks at the picture of sentiment and market direction from a long enough time frame to keep a perspective on overall trend and direction. Regarding sentiment and momentum as an esoteric wave type function can get almost religious in nature with comparisons to all of life and life itself. Elliot wave devotees and Fibonacci proponents may point to their theories of market movements and its relationship with life functions, prime numbers and all sorts of things. Mathematics of moon cycles and the tide and market mood relationships while having some slight theoretical relationship is probably such a hazy view of trading as to cause all predictions to be at once correct and worthless. Try to look at the larger picture and direction and then focus on the finer wave patterns that exist and can be exploited. Be cautious of securities or contracts which show no noticeable pattern that you can determine or which show a wide variance in pattern, being jagged and irregular to such an extent as to not be good subjects for technical analysis, but only reacting to news and some moon cycle type of mysterious set of influences. These are likely to be manipulated to prevent traders outside of the inner circle from profiting. http://radio.weblogs.com/0133588/categories/riskManagement/2004/05/26.html