Contango is an indicator of bullish sentiment in the market. This is because the price of the underlying asset is expected to drift higher well into the future. Market participants are willing to pay more for the commodity in question as time goes by. A bullish market is one in which prices make higher highs and higher lows, and this is what a contango situation in the market implies for futures prices. On the other hand, backwardation is a bearish indicator because market participants believe prices will edge lower as time goes on.