Friday, July 14, 2017

Looking for Euphoria

The final stage of a bull market is euphoria - when everyone's accounts are going and people are investing as much as they can (and more) into the stock market.   I am very sensitive to the stage of euphoria since I retired in 07 and planned on the market going up for another 10 years. Instead the market crashed the next year.  Having survive a big downturn in our first year of retirement and clawing back the over 10 years has made me exceptionally cautious.

Here are the signs of euphoria that I am watching for:

  • Everyone is talking about the stock market.   Not.   All my spouses relatives, who were all made money as speculators in the dotcom boom, have no interest in stocks anymore.   At a neighborhood cookout, I couldn't even get people who are in the business to have any interest in talking about stocks.  The only hint I have is a neighbor telling me she has been "watching" NVDA.
  • All stocks are rising.  Not.  There are still a large number of stocks declining and many stocks that have fallen previously are still near their 52 week low.
  • There are no more bears.  Not.  I still see a number of bears and significant bearish sentiment.   I know one person that has sold all his equities and has invested in a 2X bear fund.  When there are no more bears, it's a sure sign that euphoria is near or happening.
  • FOMO - Fear Of Missing Out. Maybe. People start chasing high flying stocks assuming the stock price will go higher.  Stocks advance in the double digits on a frequent basis due to buyers chasing the stock.   A few stocks have advanced significantly this year and those are being chased, but not the majority of stocks.
As I see it, euphoria may be coming, but it's not here yet.  So I will continue to maintain our investments and taking some profits by trimming positions as the market keeps advancing.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial  or investment advice. Please consult a professional advisor.

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