Extreme Pessimism in an Overbought Rally: A Mind-Bending Market Phenomenon
March 17, 2025
A bullish sentiment reading of 18 isn’t just low—it’s almost unheard of. As we pointed out in the last market update, sentiment this bearish has only occurred seven times in the past few decades. But that’s where the comparisons stop.
For the first time in history, we’re witnessing extreme pessimism while the market remains deep in overbought territory on the monthly charts—with no meaningful correction in over two years and trading near all-time highs. The disconnect is staggering.
Can Sentiment Data Be Manipulated?
Absolutely. With the sheer amount of money at stake, influencing sentiment data wouldn’t take much. But here’s the real takeaway—perception trumps reality. The masses don’t act on what’s real; they act on what they believe. If they trust the data, it is irrelevant whether it’s manipulated or not. Belief fuels action, and that action will inevitably drive both the crowd and many so-called “elephants” back into the market.
And don’t overestimate the elephants. Many of the biggest players are just as lost as the herd.
With so much money flowing through the system, even the biggest players can find themselves stuck. They can’t just sell everything at once without crashing the price, so they have to be strategic. The only way out? Gradually offloading their positions by pushing prices higher first.
They sacrifice a bit of profit to drive prices up, creating the illusion of strength. Then, they sell in waves, repeating the process until they fully exit. It’s not about maximizing gains—it’s about escaping without setting off alarm bells.
Only in hindsight will people realize this unfolded right before them the whole time. After COVID, the money supply exploded, reshaping the financial landscape in ways few truly grasped. While most were fixated on the vaccines—debating their effects or lack thereof—the real event was far bigger.
As the saying goes, the devil’s greatest trick is hiding in plain sight. And that’s exactly what happened.
Mass Psychology Unveiled: The Market’s Reckless Bender
Bullish sentiment just broke below its channel—an unexpected move, but nothing that we can’t deal with, after all, it’s part of Mass Psychology. Simply put, this confirms our outlook: this bull market isn’t just running on fumes. It’s on a reckless bender, fuelled by moonshine, coke, crack, and every substance imaginable. And it won’t stop until it collapses under its excess.
Last week’s bullish sentiment reading was 18. This week? Still 18. Two weeks in a row, with the market hovering near all-time highs, yet sentiment levels resemble those seen during a market crash. And just to add another layer of complexity, this is happening after a prolonged period of uncertainty.
From Extreme Fear to Euphoria: The Unstoppable Surge Ahead
Remember, bullish sentiment has been abnormally low for an extended time, a pattern we classified as a new form of uncertainty. Now, instead of rebounding, sentiment breaks down further, sitting 20 points below its historical average. And rather than creeping higher, it remains frozen.
Uncertainty was already high, but now fear levels are surging—completely counterintuitive for a market at these levels. The only logical conclusion is that euphoria must eventually surge to unprecedented levels to restore balance to the equation. Our once “wild” prediction of bullish sentiment hitting 70% might not be so far-fetched after all. Market Update March 2, 2025
The conventional take? New rules, new paradigm—time to YOLO. That’s what the crowd believes. Wrong. Nothing truly changes; it only appears that way. The herd is fickle, swayed by emotions, and blinded by the “this time is different” syndrome.
Our take? This confirms that bullish sentiment won’t just need to rise—it will have to blast past the moon, hit the sun, and reach the next solar system because the equation must, and will, balance. The transition from extreme fear to euphoria is inevitable. The only question is how fast it unfolds.
The first warning sign? Bullish sentiment crossing 55. The second? 60 and holding.
But for now, this irrational fear could fuel a powerful rally. A single spark—a positive catalyst—could ignite a run lasting 15 to 24 months. This extreme bearish shift has already forced us to adjust our topping targets (originally projected to occur late 2025 to early 2026). And if bullish sentiment surges past 60 and stays there, expect another seismic shift.
Conclusion
Many traders now view the market as their golden ticket to retirement—a sure-fire escape plan. That delusion guarantees most will lose everything. Even seasoned players who grasp mass psychology are slipping into the trap, convinced they can bend the rules. The moment you believe you’ve mastered mass psychology is when the market reminds you who’s in control.
You don’t master this game—or mass psychology. At best, you become an advanced student. Students adapt, they learn. Those who claim mastery grow arrogant, blind to their own flaws, and inevitably become the very fools they once mocked.
Breaking Mental Barriers
