The term contrarian indicators applies to certain measures that are in opposition to a trend. They are used to identify extremes in investor psychology for the purpose of identifying a change in the trend. 

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                    When investors are most bearish or pessimistic, the stock market is at, or close to, the bottom.                            Conversely, when the herd is most bullish or optimistic, the market may be at the top. 

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Herd psychology

Intuitively this makes sense. If the stock market has been falling for a prolonged period of time, investors are becoming more pessimistic and more people are prone to selling. Those who have been selling may sell more and eventually everybody who is going to sell has done so. At that point, the trend can change as the balance between sellers and buyers shifts. 

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When a historical extreme is registered in a reliable contrarian indicator it may be used for timing. 

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But not all contrarian indicators are useful. In fact, very few are and none have been found to identify a long term peak in the stock market. Let's explore the ones the research has identified as reliable.

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More is coming. Fear not as "he who waits, reaps a full harvest". - Grasshopper

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