Contrarian investing. Lessons for us.

There is some confusion as to what the term means. It DOES NOT mean that buy when there is blood in the street or when the Market is going down.

The term "Contrarian Investing" refers to using the ratio of Bulls/Bears to call Market tops and bottoms. The ratio refers to Investment Advisors. This does not mean that Investment Advisors are dumb. There is an entirely legit explanation why this ratio works.

HERE IS THE EXPLANATION.
When the ratio of Bullish vs Bearish Advisors reaches a certain level, that means that they and their clients are invested and they can not push the averages any higher. Conversely, when the percent of bullish  Advisors drops below  25%, a Market upturn is coming. Why? Because the Sellers have sold and are sitting on cash. Here is a graphical proof:

So, where are we as far as the ratio is concerned? The bullish reading is down to 32%, down from 55% in December. Not far from 25%. In Larry's prognostication, we will see an upturn toward the end of February. Then we will see a rally in March. However, in order for the rally to last, we need the FED to open the spigots of the money flow. Supposedly, that is not going to happen while the FED is playing TAPERING.

So, will the FED stay the tapering course? Judging by the effects of tapering $20B/month, it is doubtful that the FED will stand by while world stock markets and currencies implode. We should know by mid year. Which is Larry's prediction for the end of the Bear (Aug-Sep).

This is NOT investment advice. Just my interpretation of what I read.