Читать книгу Unloved Bull Markets - Craig Callahan - Страница 16

Investors or reporters would often ask, “Why did the stock market go up today?” Their tone clearly conveyed skepticism and the belief that the stock market should not be going higher. The simple, correct, but flippant answer would have been, “We are in a bull market, stock prices are supposed to go higher!” That answer would not have worked because people do not like being told they are wrong, and they did not realize a bull market was under way.

Even the terminology used to describe the market conveyed the unloved nature. The short-term dips of 5% to 10% were called corrections, which implied that the market was not supposed to be going higher and that it was correcting itself by going down. As we know now, the correct path was upward. The market was supposed to be going higher. In our research department, just to keep our sanity and our long-term view intact, we labeled those dips incorrections.

In previous bull markets, if the market was higher one day, there would be more buying the next day by momentum investors. It is often referred to as “fear of missing the boat” as it is pulling away from the dock. In a bull market it is usually a terrible feeling seeing the market move higher while holding cash. During this bull market, however, if the market was higher on a day the next day saw a sell-off thirty to sixty minutes into the trading day. It felt like investors, not realizing we were in a bull market, felt the advance the day before gave them a chance to get out. So to move higher two days in a row, buyers had to take out the weak jittery money.

One metric used by investors who use technical analysis is comparing the number of issues that advance each day to the number that decline. If over a recent period of, say, ten or thirty days a lot more issues are advancing than declining, there are two interpretations. One is that the advance has breadth and is sustainable. The other is that the market is “overbought” and will soon turn and go lower. Commentary during the bull market typically favored the negative view as the market was labeled “overbought.” It appears that the analyst's predetermined bearish bias influenced the interpretation of the data.

For the eleven-year bull market and especially for the new one that began March 2020, there is a new generation of investor. These new investors are very situational. They don't believe in the broad market, just special situations like the unique stories of Amazon or Tesla. In the early stages of the 2020 bull market, it was the “work from home” theme. How would investors behave if they didn't believe in the bull market but just invested or speculated in a stock they think is unique? They tend to be jittery and set very quick sell thresholds that we believe explains some of the volatility and rapid theme changes that occurred during the eleven-year bull market and the new 2020 bull market.