Traders are an odd bunch – we have to be because of the nature of our profession and shock events such as the recent US election tends to amplify this odd behaviour. When we trade equities we all want a rising market, a market that goes up day after day with nary a pullback in sight. Yet when we get such a market all sorts of strange behaviours manifest themselves. The chart below is off the Dow, from this chart I can ascertain that there is not a single logical reason why a breakout/trend following trader would not now be long the Dow and every other US index.
It doesnt matter how you slice or dice it the Dow, in fact most major markets have been trending strongly since the election. Yet my observations and conversations tell me that despite this large numbers of traders are sitting on the sidelines. The various excuses I have heard range form I need more confirmation ( they dont actually ring a bell) to I dont like Trump so therefore I cant profit from a rally based upon his election. None of these reasons are logical and all stem in my opinion from simple fear. Domestically we have had a market that has been prone to false breakouts and disappointments and the Dow seems intent on rocketing towards 20,000 which no doubt has put the willy’s up some traders. However, fear has never been the basis for a successful trading career and in some instance such as this many default to the old wisdom that there are no old bold traders and that to act on the basis of such a strong reversal in sentiment would be foolhardy. But this statement is misinterpreted by many as a call to do nothing, what it actually means is that there are no reckless old traders – you can never be a successful trader without being bold.
This move may stall tomorrow, it may go on for months, nobody knows. What we do know is that disappointment at missing out is a profoundly desolate feeling.