Pressure to Participate - Pressure to Perform

George Brooks |

As the market presses higher undeterred in face of a number of significant uncertainties, it is obvious individual and institutional investors are beginning to panic for fear the train has left the station without them.

Money managers must be especially stressed. Many buy the same stocks, most have “buy limits’ above which they don’t want to buy. Whether it’s a decision by a human or computer doesn’t matter, something must be done quickly or positions will be unfilled.

It says a lot for the internal strength of a market that can rise this steadily in face of uncertainties. It does not say, throw caution to the winds.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Thursday, March 31, 2011 9:24 am EDT

DJIA: 12,350.61
S&P500: 1328.26
Nasdaq Comp’: 2776.79
Russell 2000: 840.37

What’s driving the market ?

Who cares ? – as long as it goes up. Besides, who wants to miss out, better go all-in.

THAT IS PRECISELY THE KIND OF THINKING THAT CAN LEAD TO SOME UGLY LOSSES.

An interviewee on one of the financial news channels advised listeners to avoid stocks that are not running up – i.e., only buy stocks that are surging. He has a point, but at some point you are going to catch the high and it may take months to erase a paper loss.

What’s my point ?

The upside bears similarity to the downside. In the former, there is a tendency to dump a loser, just before the rebound. The stock hits a frustration point where an exasperated stockholder thinks, :I can’t stand it any more” and sells out.

Same thing on the upside. Watching stocks gap up one after another, an investor with cash reaches a point where they think the same thing- “I can’t stand it anymore” and makes the plunge – often (not always) at a major or minor top.

Getting back to “what’s driving this market ?”

I mentioned one – institutions with clients’ cash that must be put to work and are faced with a market that is running away from them. Left on the train platform with a satchel of cash earmarked for stocks, clients will find someone else to run their portfolio.

So much of this is pressure – emotional pressure (fear/greed), as well as professional pressure to perform.

Yes, the economy is on the mend, but it has been so for 15 + months, besides that’s why we are looking at a double since the bear market bottom in early March 2009.

Jobless Claims came in at a respectable minus 6,800, not great but OK. Inflation expectations are higher according to a news channel survey, but isn’t that what the Fed wanted vs the unthinkable alternative “deflation” ?

Is it the Q1 earnings due out this month ? Could be.

Perhaps, the BIG money is looking out to 2012 and beyond and see a brighter picture.

More than likely.

George Brooks
sensiblesleuth@gmail.com

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GMO General Moly Inc. 0.29 -0.02 -6.03 62,238

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