It may feel safer to be in a crowd. But remember that most people act emotionally rather than rationally.
During today’s trading the leading indicators did not move in tandem with general equity indices, which are the lagging indicators. When normally high-beta ETFs gain less than the S&P 500 in trading, such as occurred today with SMH (semi-conductors) and KOL (coal producers), we historically experience a strong equity sell-off sooner than later.
The current buying frenzy is trend chasing, which is the activity of many hedge funds and momentum players, as well as some flock investors, getting greedy. They cannot stand the idea of not making money from this trend. This is all because of the upside breakout of the S&P 500 index. These are the same investors who sold out their positions at low prices, due to fear and foolishness, during August and October lows of last year. In contrast, insiders and experienced investors finished their selling a few weeks ago. As usual they are ahead of the crowd as they buy and sell long before the hedge fund, chartists, computer software traders and momentum players. The least experienced investors are the last to join the party.
During the past several years, nearly all upside and downside breakouts were later proven to be false causing those trend chasers to lose money over and over again.
At the end of the day, try to respect the market’s schedule; it’s not going to respect yours.