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.
- The longs have nothing to lose and are happy to watch their values increase.
- The shorts will stop the pain and buy sooner or later.
- The sideliners will feel the pain of regret and start to buy.
Read the full article at http://www.businessinsider.com/the-psychology-of-new-market-highs-2013-1
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