They can lead you astray and make wrong decisions, which can cost you dearly. ‘They’ are the experts, pundits and analysts that get into your head. If you do not know any better, then you listen to them and must live with the result. Thursday we heard hedge fund cowboy David Tepper tell the world they should not go crazy owning stocks right now. His reasoning: stocks are expensive, and instead of being 100% invested he is now 60% (his real message was ‘do not be frickin’ loaded in stocks’).
So, the market took this as a sign to sell— and so it did. But, we know there are a million reasons to sell but only one reason to buy. Markets were modestly overbought by early Wednesday as the SPX reached the 1900 milestone for the first time ever. With no buyers left, why not take some money off the table? Did we really need to hear from Mr. Tepper to make that happen? Of course not.
We hear wild and crazy predictions all the time, and it’s just usually noise. But those with some credibility tend to have some influence. I heard Ralph Acampora say he ‘fears a 25% crash in markets soon.’ No details, no reason, just a ‘boy who cried wolf’. I have little time to pay attention to these predictions – what am I supposed to do with it? Is this going to help me make the next trade? I need to ignore it and just turn it off. He’s clearly trying to line himself up for some sort of CNBC/Fox/Bloomberg appearance if he lucks out.
Bottom line, pay attention to the signals of the market and not what anyone thinks. Opinions are rampant when confusion is in the air.
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Learn more about Lang’s firm: Explosive Options.
