Consensus Is A Shallow Pullback
- Posted by JC Parets
- on February 21st, 2013
Everyday I speak with investors from all walks of life: hedge fund managers, stock brokers, retail investors, high net-worths, buddies both in and out of the industry, etc. There seems to be this ongoing consensus that the inevitable stock market pullback is going to be just that, a pullback. In fact, everyone is sure of it.
From an investment psychology perspective, this worries me. Remember, when everyone is so sure of something, it typically pays to at least consider the alternative. What if this is not just a pullback?
Every day I walk into work and ask myself some simple questions: What’s the last thing that I expect to happen? More importantly, what’s the last thing that my fellow market participants expect to happen? In this case, I think the clear answer is a bigger, deeper correction. This is just an observation of course, but it’s what I’m thinking.
Now, from a portfolio management perspective, this doesn’t change anything we’re going to do today or tomorrow or even next week. But philosophically, I think it’s prudent to keep this in mind.
Being from Miami and watching so many people brainwashed into thinking that Real Estate would always go up in value was fascinating. Everyone knew that housing was a good investment. I was mocked at the time for not participating. A more recent example was the Apple bubble. Late last summer I couldn’t think of a single person that didn’t know that AAPL was going higher.
So do we short everything and not cover until S&Ps are down 40%? No. But I do think it’s worth pointing out that the consensus seems to be that this will be a shallow pullback. We’re at least considering the possibility that it isn’t. There’s no harm in that. The foul would be not to.
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.blog comments powered by Disqus
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He is a 10-year veteran and Market Technician who actively manages money incorporating Technical Analysis and Behavioral Finance into his practice. JC’s work has been featured regularly on CNBC, Fox Business, Bloomberg, Business News Network, Wall Street Journal and Yahoo Finance among many other financial media outlets. More...
- Is Twitter Stock About to Break Out?
- Fox Business: Internet & Social Media Stocks
- About That Breakout In The New York Stock Exchange Composite
- Audio: Benzinga Morning Radio Show 2-26-15
- My Favorite Gap And Go Setup in Real Time
- Free Talk At The New York Traders Expo
- Are Social Media Stocks About To Break Out?
- BNN Appearance: Internet Stocks & Natural Gas
- Here’s Why I Like Healthcare
- Video: Chart Requests From The Community
Archive by Year