Squawk Morning Briefing: Don’t Let Me Be The Last to Sell

Buying slowly entices more buyers as the investing crowd seduces the remnants on the sidelines with the lure of a sure profits in securities which seem to only go up.  Even those who don’t trust the rally on fundamentals figure that as long as there’s someone else more deluded about the market’s value then today’s overpriced stocks can be flipped for profit by selling them at tomorrow’s even more overpriced values.  This so-called “greater fool theory” has fueled many bubbles.

Now we’re not saying that the stock market is currently a bubble.  However, if it walks like a duck and talks like a duck and collapses like a balloon when popped then you’re left to unmix the metaphor on your own.  The reality is that nobody want’s to be the greatest fool left holding the bag as that is the “biggest loser” contest nobody wants to win.  So once the curtain is drawn and it is revealed that stocks actually can move down, the exits can get clogged and panic can set in.   There will be inevitably bounces: reluctant bulls may make a stand; prices may drop to levels that attract value seekers; and/or shorts can get squeezed.   Yet once these moves start, the bears are in control.

Again, the wave structure will be our road map.   Selling phases have the same structures as buying phases and that will help us to tell corrections (in either direction) from the trend moves.

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