First, let me gently ask folks who didn't catch it earlier to vote for my blog; the widget in the upper right corner disappeared, because the Best Blogs site was (ironically) down most of the day. But now's your chance! Voters yesterday got us into 4th place (we're in the top three now!!!). I hate to do the "PBS Fund Drive" vote-begging every day, but this only happens once a year! For those that have voted, again, thank you.
Second, I wanted to make another remark about "trust", which is a topic I wrote on about a week ago. My point is that post is that people were unwilling to buy into a market they didn't trust. But the two polar emotions that drive any market – greed and fear – are always in battle, and greed won the day yesterday. Those of who listened to my "spotlight" broadcast last Friday on thinkorswim heard me say that there would be a "melt-up" where people would be shoving and pushing through the door, driving the market 15-20% higher before the month is over. (Tom Sosnoff's jaw dropped when I said that).
Well, it seems that target might get fulfilled not in two weeks, but in two days. I've been pretty vocal about "1050 to 1100" as the turning point for the S&P, and the futures are already 1054.25 as I am typing this.
I have a long, long list of "come to Papa!" stocks which are ripe for shorting at the correct retracement level. About 15% of these met that level yesterday, far more quickly than expected, and I am in position on those. I will keep monitoring them, one by one, and will enter as their appropriate retracement levels are met.
Anyway, back to trust………so think about the psychology of John and Jane Public right now. They've been through a harrowing several weeks where their investments have been battered. They've been scared. They've been anxious. They've been angry. But they were too scared to take the plunge. Until yesterday.
So buyers stormed the castle. The Dow went up nearly 1,000 points in a single day, and we're clearly positioned for another very strong open this morning. So more buyers will storm in. Very quickly, John and Jane Public are going to fear "missing out", and they will flip from fear to greed. That process is already well underway.
So now they're back in the market, and they're waiting for the market to "make good" on all the damage done earlier. But think about this………what if, relatively soon, the fall resumes? What if all the gains from yesterday and today are eliminated. Even more, what if, before this year (or even this month!) is over, the market is at levels even lower than last week?
You can imagine what the Publics are going to think then. They're going to be p*ssed off. They're going to feel duped. Tricked. Robbed. And they will trust the market even less than they did before, making the likelihood of their diving yet again into equities any time soon even lower.
Markets are all about psychology, and these markets lately are all about trust. I have a feeling that a cautious public is about to feel cheated again much sooner than anyone expects.
