by Jared Levy on June 2, 2010
As the markets were screaming higher earlier this year, I remember having conversations with friends of mine both in and out of the industry. Many of the financial folks were in disbelief that the market kept rising, but as it continued to do so, it seemed many of them were trying to justify being long, even if reluctantly so.
Many of the non-financial types I spoke with, who were listening to the nightly news and reading about the market’s gains, would just keep talking about jumping into the market and some were waiting for that “perfect time” to enter. For some, as the market kept rising, the lure of potential profits was tempting the retail investor, because they may have felt they were “missing out.” There are many theories that retail traders are the last ones to buy the market before the selloff and the last ones to sell before it turns around.
I don’t know if this thesis can be proven for certain, but I do know that knowledge is power. Additionally, having a good sense for what the masses are thinking is just as important, as it can help gauge market sentiment.
If market participants are uneasy about a rally…