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Ignore Sell The Inauguration
For the individual investor, bullishness peaked just two weeks after the election at 49.9%. And since then, it’s drifted until the past week when it actually plunged almost 7%. The market covered a lot of ground in a short period of time, but there was never a sense of irrational exuberance. In fact, one would have to go back 107 weeks to find the last time bullishness was above 50%- just three weeks shy of the all-time record.
This sense of cautiousness underscores why so many investors missed out on the stock market rally that began in March 2009. It also suggests a more disciplined individual investor. Still, investors are beginning to warm up as bullishness has been north of 40% for nine consecutive weeks.
My concern is that individual investors have a habit of blinking just at the moment they begin to feel too confident. A case in point: back in January 2013, the Dow Jones Industrial average was charging toward a new all-time high, and bullishness stood at 52%. The index smashed through its resistance and began a two-year non-stop rally, but it had plunged to just 28% at the end of March’s bullishness.
This same script has played out over and over throughout history.
There may be a psychological aspect to all of this such as Lucy pulling the ball back as Charlie Brown gets ready to kick. No one wants to feel like a chump. By the same token, there is also a sense of manipulation involved in this as well, and there is no doubt that big Wall Street money likes to ride these waves long before encouraging the masses.
I know it is tough ignoring the Street telling you to sell the inauguration, ignoring the angst that comes with market rallies because it’s time to build a portfolio.
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