Market Analysis for Sep 13th, 2019

As we approach new highs here I was reminded of this post I made several years ago. This is From Prechtrer's The Scoionomic Theory of Finance and really stood out to me when I was reading the book... Highly recommended reading if you have not done so.

"The vast majority of speculators, who buy when prices are elevated and sell when the markets falls, do not feel nervous and fearful upon acting; they feel relieved. They do not know then have actually increased their chances of losing or reduced their chances of gaining because unconsciously they have acted to reduce the discomforting feeling of missing out on gains or risking losses. Because their risk actually increases by both sets of actions, we may confidently conclude that such behavior is non-rational.

If you want to meet speculators who consciously take on risk, seek out the few who buy when others are panicking or sell short when the crowd is giddy. On taking the action, they will be nervous if not downright fearful, because the conscious portion of their minds understands they are taking on risk, and the unconscious portion is screaming not to do it."

FOMO is natural and when we act on that FOMO we feel relieved. The opposite is true when we are acting when all others are fearful of losses not fearful of missing out.

Michael Golembesky is a senior analyst at ElliottWaveTrader covering US Indices, the US Dollar, and the VIX. He contributes frequently to Avi's Market Alerts service at EWT while also hosting his own VIX Trading service.