Man, are the market news sites really capitalizing on this holiday crash or what?! Not that I blame them at all, it’s their business. Fear attracts more eyeballs than anything else, and that’s how they make money. Their revenue is certainly not from trading. The articles that get the most clicks are the ones where they drag out some guy who “predicted the 2008 collapse” or “made billions in the crash of ’87” and have them warn us that the worst is yet to come.
Of course I have no clue what will happen in the next few weeks, or months for that matter. Sure the S&P 500 could keep dropping. Yes, it’s possible we are entering the worst bear market in modern times.
Yet, I have observed this phenomenon many times and find it both fascinating and exasperating that we get suckered by the same trick every single time. What trick? The guise of hiding the fact that the market is JUST AS LIKELY to go on a heart stopping tear upward to the stratosphere after a crash like this. It’s like we all collectively forget. We are inundated with news and social media, and suddenly it becomes a fully accepted forgone conclusion that stocks are doomed for the foreseeable future.
No disrespect to folks successfully trading this momentum, or trend, or change in fundamentals . . . . well, not so much the fundamentals. I don’t think there is anyone who actually believes the economy growth has slowed enough to justify further crashing. Not that it matters.
In any event, my point is that one of the most dangerous things in trading is bandwagons. Because the sharks love bandwagons.
And when the bandwagon gets full, the sharks eat them for breakfast.
I think it’s better to stay focused on following and analyzing one’s personal trading plan.
Stay safe out there.