A contrarian is defined as an individual who opposes or rejects popular opinion. In other words, when the crowd zigs, contrarians zag, or when the investing masses buy, contrarians sell (and vice versa).

Contrarian investing tends to work well when groupthink becomes extreme. Why?

Just as a fire needs wood to burn, any market needs fresh buyers to “burn” higher. When no more buyers are left — because every potential buyer has become an owner — rallies run out of fuel.

The same is true for protracted declines, when sellers have sold, price tends to turn higher.

In a June 7, 2017, MarketWatch column titled “There’s plenty of fuel left to fire up this stock market,” I used the image below to illustrate the upside potential for the S&P 500 SPX, -2.37% and other indexes like the Dow Jones Industrial Average DJIA, -1.92% and Nasdaq COMP, -3.01% .

Currently, stock market sentiment is essentially neutral, and doesn’t provide an edge for contrarians.

However, there are other asset classes with historic sentiment extremes. The crowd is zigging. Is it time for contrarians to zag?

Most-hated asset: silver

Various sentiment gauges show that investors hate silver right now. In fact, the masses are so bearish that commercial hedgers are net long silver futures for the first time in 32 years.

Commercial hedgers are “in the business of silver,” and are long (or benefit from rising prices) by default. Such hedgers use futures to protect themselves against falling prices.

As the green arrows show, commercial hedgers have earned the label “smart money.”

Silver ETFs include the iShares Silver Trust SLV, -7.10% and ETFS Physical PM Basket GLTR, -3.24% , which provides exposure to gold, silver, platinum and palladium.

Second-most-hated asset: Treasuries

Commercial hedgers have never been more bullish on Treasuries across the bond curve. The chart below plots the iShares 20+ Year Treasury Bond ETF TLT, +0.13% against their aggregate net exposure to 5-, 10-, and 30-year Treasuries.

Due to their long maturity, the iShares 20+ Year Treasury Bond ETF comes with the most contrarian upside potential, but other Treasury ETFs include: iShares Short Treasury Bond ETF SHV, iShares 1-3 Year Treasury Bond ETF SHY, iShares 3-7 Year Treasury Bond ETF IEI, -0.00% and iShares 7-10 Year Treasury Bond ETF IEF,

Conclusion

Sentiment-based contrarian signals (such as “buy silver and Treasuries”) tend to be most successful over a one- to four-month time horizon. Based purely on sentiment, silver and Treasuries are a “buy.”

More potent buy (or sell) signals happen when several indicators point in the same direction. Unfortunately, that’s not currently the case with silver and Treasuries.

The stock market is also caught in the crossfire of contradicting indicators. For the sake of objectivity, here is a look at five glaring indicator contradictions and how they can be reconciled.

Simon Maierhofer is the founder of iSPYETF and publisher of the Profit Radar Report. He has appeared on CNBC and Fox News, and has been published in the Wall Street Journal, Barron’s, Forbes, Investors Business Daily and USA Today.