Salient to Investors:

Denise Shull at The ReThink Group writes:

  • When the market or stock is very near all-time highs, psychology plays a bigger role than normal.
  • Research shows that those who think of the market as a poker game are better at predicting price action.
  • The ‘who is in more pain?’ question give huge insight into price direction.
  • Near or at new highs means that everyone who is long feels no pain – once an index or stock makes it over an old high, it is smooth sailing with no storm on the horizon.
  • History shows those who believe that the underlying fundamentals don’t support the highs are no match for the short squeeze.
  • Near or above new highs bring three psychological forces pushing for even higher prices.
    1. The longs have nothing to lose and are happy to watch their values increase.
    2. The shorts will stop the pain and buy sooner or later.
    3. The sideliners will feel the pain of regret and start to buy.

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