Bull markets end when there are no more buyers

Bull markets end when there are no more buyers.

Buyer exhaustion doesn't appear to have been reached yet. I think one of the reasons is each time buyers turn into sellers and decide this market run is over, they then look at their investment alternatives (cash and bonds) and run back into the market justifying or telling themselves the Fed has got their back.

Each move higher saps the strength of buyers. At some point, buyers are bought out and are then caught in the next pullback buying the dip (because that has always worked before). They then get trapped when the market falls again and they double up. Not because they believe the market is a good buy, but because they have always won when they bought the dip. When the market fails to perform on the upside, they find themselves fully invested (or in the case of traders quadrupled up...initial position in the money...purchase at the high chasing momentum...adding when the markets falls 5% because it is a BTD market...putting the fourth position on when market down 10%) and now find the market down 15%. This is serious gut check time. Do they acknowledge they have been wrong and cut their positions, or do they gamble and quadruple up?

Whatever the case, it feels as though the market knows their mind, their weaknesses and their positions, and it is able to prey upon all of those things, forcing them into bad decisions. Welcome to the humbling.

Great Phrases

Aspirational stupidity is alive and well in the world. (Barry Ritholz)

15 years of small cap outperformance is enough (Eddy Elfenbein)

Nobody knows nothing (William Goldman about the movie business)

Successful investing is about having people agree with you...later (Jim Grant)

Whether bull market or bear market, fear moungering sells (Ari Wald)

The trend is your friend, but not at both ends (Bonnie Baha)

Anything can happen...and often does (David Blair)

You can't manage toxic people...best to cut your losses and move on (Brian Lund)

Foreign events have a limited role in the investment process (Jim Bianco)