"The degree of one's emotions varies inversely with one's knowledge of the facts." --Bertrand Russell
The news media is very excited about the Dow Jones Industrial Average hitting 14,000 for the first time since 2007. Individual investors, not so much.
Ever since the market bottom in March 2009, we have had a series of very strong V-shaped rallies. At least a half dozen times we have had multi-month, straight-up moves that looked like they would never stop. Shorts get squeezed and underinvested bulls can't catch up.
What is most interesting about these moves is how little excitement they have produced among individual investors. The response is that it is just another manipulated move produce by the Fed and the computers and really has nothing to do with the health of the economy and individual interest in the stock market.
The latest move has been a little different in that regard. There have been sizable inflows into equity funds and there is talk that, although the economic recovery is still painful slow, we are at least going in the right direction and confidence is returning.
The bears have the same response they always have: the market is simply ignoring a slew of negatives again and there will be a day of reckoning. They have been wrong about this for nearly four years, but with so many people still suffering from the fallout of the Great Recession, the idea that the market is misleading has great intellectual appeal.
The one great lesson of the market over the last four years is not to look for reasons to fight the trend. That has been the single biggest mistake you can make and it is very easy to make if you apply common sense. There are so many reasons, technical and fundamental, to think the market can't keep running, but they simply haven't mattered.
What I find most challenging about the market is that we so seldom have the level of excitement among traders that I have associated with past trends. There is talk about bullishness and hopes that the market is finally moving on to a new stage that will attract those who have forsaken it, but I see few signs of the interest prior to the 2008-09 crash.
The best way to deal with this is to maintain a positive bias until there is clear change in the price action. You can't be too anticipatory or you will be burned just like the bears were on Friday.
Riding a trend isn't as easy as it sounds, but it sure pays much better than constant top-calling. You can find good reasons to battle the bulls, but the simple fact of the matter is that they are winning and we need to stick with them.