Will The Public be Late To The Party Again?
The stock market has surged sharply higher since the fiscal cliff vote in the United States in early January. The bulls have run wild at the start of the new year. Many talking heads in the financial media have now started to say that money is coming into stocks instead of the usual mutual fund outflows that have been occurring since 2008. Often, when the public starts to get excited about the stock market it is time for a correction to occur in the markets.
Many professional institutional traders will unload positions right into the public's buying spree. Just think about it, traders can easily see what happened to tech leader Apple Inc (NASDAQ:AAPL) when it was trading around $700 a share in late September 2012. I will never forget watching a clip on CNBC and seeing all of these individual investors that were saying they will never sell Apple Inc. They were talking about how this stock is a life time hold. That day, I pointed it out to my chat room members that the top was likely in for Apple Inc as the public has reached the emotion of euphoria. Please understand, stocks and markets top out on euphoria and bottom out on despair. This is how it has been from the beginning and this is how it will be until the end.
The central banks around the world are printing money out of thin air in order to try and get the public involved in the markets. Throughout recent history (past 200 years) this has always worked and it is still working today. The public always wants to be a part of something important. Just look at what the public did from 2003 through 2007 with the housing market. They were buying houses at outrageous prices even though they really could not afford them. I remember when I sold my house at that time of euphoria, I had 100 people on my front lawn bidding the house higher. Believe it or not I was a year early, but that was the first day that I had the ad in the newspaper. Soon afterward, the top of the housing market was in.
Everyone in the trading and investing business knows that with every bull market there will be another bear market. This current bull market that started in March 2009 has already been in place for nearly four years. How much longer does this bull have left in the tank before it rolls over and the bear market takes hold? If anyone has ever been to Spain and witnessed a bullfight you know that it takes a lot to kill a bull. So there could be some more upside to go before the bear awakens and claws everything lower. Sure, the central banks are printing a lot of money, they always have, but when the bear comes back it will not matter. Watch the public's opinion of the stock market for signs that this bull market is coming to an end.