Keeping Up With the Dow Joneses

 | Feb 01, 2013 | 1:40 PM EST
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In recent years I've been surprised by how little excitement there is for big moves like today's. The folks on television shake their pompoms and pretend that they have played the market to perfection, but what I don't see are individual investors who are pumped up about catching a big run and are eager for more. The more common emotion seems to be "I can't keep up with this market and I sure wish it would pull back."

I've struggled to find an explanation for why this is the pattern of behavior in recent years. I suspect the primary reason is that the action is driven more by computer algorithms, because individual participation in the market has dropped steadily for several years. People have always complained that the market is manipulated, but the disconnect between the economy's performance in recent years and the market's behavior has resulted in a widespread feeling that there isn't any rationality. In addition, many people have been badly burned by two major collapses since 2000 and they are sapped of confidence.

The good news is that there has been a big increase in inflows from individuals in the past month. Maybe they are regaining confidence and trusting in the market. Unfortunately, I'm not sure that the straight-up action we have seen over the past month makes people feel that the action is rational and not manipulated.

The way to deal with this is to stay focused on price action and nothing else. Until there is weakness, the smart bet over the last three-plus years has been to stay with the trend no matter what. That so many hate it only makes it persist longer.

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