The Fear Of Missing

The bears could take solace in the fact that if we rally Tuesday and Wednesday we will likely be overbought. I would likely further hedge my portfolio if that scenario plays out.

The reason I was able to get aggressively long at the most recent bottom was because I waited for the market to become oversold before doing the bulk of my buying (mainly removing my hedges). When I go short I try to exercise the same patience.  That patience means that I will miss tops where we do not get fully overbought but it also saves me a lot of pain. I used to hate missing moves but over the years I have managed to get over it. The fear of missing is an investors worst enemy. Have a great weekend.

Thank you to all the readers who have been going to Amazon from my site, when making a purchase. Remember, if you shop at Amazon you could support the blog at no cost to yourself. There is an Amazon banner all the way at the bottom of the page or a number of links on the side. If you go to Amazon through any of those links when you make a purchase, the blog will receive a small percentage. The item will not cost you a penny more.

13 comments:

Anonymous said...

Ahh the return of the bull...and it only took 5 days!
By far the majority of interviews and articles after todays close have been very bullish.

Seems theres not a chance of double dip anymore and we are headed for the skies!!
I will be joining the short camp sooner than later.

Anonymous said...

Hi CO, thought you might find this interesting in terms of trading against sentiment and its performance in the past. I apologise if its in the wrong context

http://www.safehaven.com/article/18069/bearish-investor-sentiment-isnt-always-a-bullish-signal

Tsachy Mishal said...

Anon 1. I agree that sentiment has turned more positive. But it takes time for people to act on their newfound bullishness which is why I like to use the overbought indicators in conjunction with sentiment.

Tsachy Mishal said...

Anon 2,
I find sentiment very useful but I dont rely on a single indicator. I use all of them and weigh the evidence.

I would point out that sentiment last week was a lot more extreme than the threshold used in the article you linked to. Sentiment is a lot more useful when it is extreme.

Tsachy Mishal said...

The threshold used in the article was more bears than bulls. Last week we had 29% bulls and 38% bears.

I would be curious to see how the numbers would work out when bears outnumber bulls by 9%.

Chaos! said...

What also makes a difference is how the current sentiment number relates to the range of recent numbers, ie it took more bearishness in late 2008 to signal a turn up than it does in 2010. The recent sentiment numbers were similar to those last seen in late 2008, but they now come in a trading range market not a casading market, like late 2008 months. They gave an exceptional trading signal. Fyi- there's more upside coming.

Anonymous said...

everyone's bullish now.

Anonymous said...

street poll on the street.com...are you bullish or bearish going into next week?


60% bullish

30% bearish.

Anonymous said...

ideally would want a slight new high for the year to 1220 when the dumb money pours in and then a repeat of oct 07 down wave.

Chaos! said...

It takes time to work off the bearishishness of the past few weeks. Long only managers have to catch up (buy beta), and shorties have to mitigate their losses. It doesn't matter what we think. What matters are sentiment indicators: put/calls, vix , Rydex flows, and sentiment polls to name a few. The truth is in the data.

Tsachy Mishal said...

Very true Chaos! The people who participate in TheStreet.com poll change their minds with the wind. They are like day traders. I would only use this poll for very short term trading. This adds weight to the fact that we are close to being short term overbought. But says little as to what will happen after we work off that overbought reading.

It takes time for hedge fund managers, to go from de-risked to re-risked.

Anonymous said...

i don't believe the theory of "long only managers need to catch up". long funds are almost always 90% vested. i believe most funds underperform for other reasons like buying underperforming sectors and stocks. i've heard "cash on the sidelines" argument for years, i think it's kinda bs.

Anonymous said...

having said that, they'll probably take remaining bit of cash they got and bid up stupid penny stocks rest of the month in desperation so as to not lose assets in redemption.