|  JUN 1988

Contrary opinion by Henry Van Kessel

Contrary opinion by Henry Van Kessel A contrarian is a person ahead of the times. He sees things others don't. Like a master chess player, he observes more pieces of the situation, looks further on the horizon. When the situation is right, he plays a big hand because he has done his homework and is not relying on anyone's opinions. The few lead, the many follow. But the followers don't know who the real leaders are. Rather than trying to find the leaders (who appear too elusive) one popular idea is that, since the followers are statistically losers, perhaps it would be best to follow the followers and do the opposite. Thus was born bullish consensus! Bullish consensus Bullish consensus is arrived at by polling commodity advisors and brokerage houses and estimating the percentage of market participants who are bullish in a given market at a given time. The theory is that when opinion is extreme, the odds of a market reversal are high. Let us place this theory under close scrutiny. There are some very deep problems with using bullish consensus as a predictor of price movement. First, what makes traders and advisors bullish? Behind the thousands of reasons given, there is one thing—a market that is going up! Thus, in a given week, if a market has made a sharp advance, odds are very strong there will be more bulls than before the rally occurred. After all, almost everybody just follows the market.

by Henry Van Kessel